More than half of in-house lawyers in the UK say they will send less work to outside counsel over the next five years, according to a Thomson Reuters survey.
The 2025 State of the UK Legal Market report found that 54% of UK in-house lawyers say a higher a proportion of work will be done in-house, with 35% of law firms expecting to see the same. This desire to keep more work in-house is being driven by general counsel facing greater cost pressures, with 28% of in-house teams looking to decrease legal spend, up from 22% in last year’s report.
John Shatwell, head of legal professionals Europe at Thomson Reuters, said: “A growing number of general counsels are feeling pressure to bring external costs down. For many of them, this will mean bringing more legal work in-house. They are also hoping that the use of GenAI will allow their external law firms to reduce their fees.”
In-house lawyers and law firms believe the growing adoption of AI tech will continue chipping away at the traditional billable hour model, with more work to be switched to value-based billing. Currently, less than a third of work is being billed on a value-based rate (29%), compared to 62%, which is still billed at an hourly rate.
Some 64% of GCs and 58% of law firms anticipate that this proportion of hourly rate work will fall over the next five years. More than a quarter of global companies with revenue of at least $1bn want to see value-based billing from their outside counsel, rising to 32% for UK-based companies.
In-house lawyers hope that GenAI will help them reduce costs as well as speed up efficiency, with 41% of corporate counsel also saying that what excites them most about GenAI is the time it will free up for them to work on more complex and strategic tasks.
Some 30% of law firms also worry that slower adoption of GenAI is creating a strategic disadvantage for their firm, potentially resulting in them losing out on work to peers who are adopting the technology faster. Nearly half of law firms (46%) believe alternative legal services providers that use GenAI are more attractive to clients.
Shatwell said: “Lawyers and clients alike are keenly aware that new GenAI tools will shift costs and increase productivity. Clients continue to expect high-level strategic counsel from their law firms, but also want to see any productivity savings passed onto them – this will primarily happen through a shift to value-based billing.”
He added: “The report’s findings confirm a prime concern within the legal sector – that lawyers won’t be replaced by GenAI, but may well lose work to lawyers who do use GenAI.”
A report by The Global Legal Post, published in association with LexisNexis, found that law firms and in-house teams in Europe are waking up to Gen AI’s ability to improve the quality of legal advice at a lower cost as well as the stress this is already placing on the traditional law firm model.
Raúl Rubio, an IP and technology partner at Spanish firm Pérez-Llorca, is quoted in the report, which was published earlier this month, saying: “The pricing model will become more and more value-based – this means that in some cases, we will be able to provide more value than the hours that we invest in a specific task.”
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