UK corporate clients are increasingly turning to the Big Four accounting firms for legal services as alternative legal services providers (ALSPs) take a bigger share of the market, new research has found.
It also said clients were looking, above all, for “deep understanding” of their businesses when instructing external lawyers.
Thomson Reuters said much of the growth of ‘new law’ service firms or ALSPs in the past year has come from the Big Four.
“Indeed, UK legal clients are increasingly going to the Big Four for certain legal-related services, a trend that has been growing significantly since 2015.
“The Big Four continues to dominate the alternative legal brand landscape with large gains in client favourability in the past 12 months; yet it is still unclear how deep the in-roads are. Currently, these firms are mainly used for tax and audit matters.”
Researchers spoke to over 265 corporate senior counsel and studied the financial results of 29 global law firms active in the UK for the State of the UK Legal Market 2022 report.
They said that, of the Big Four, PwC and Deloitte saw large gains in their “favourability” in the last 12 months.
Since 2015, there also has been a “significant increase” in clients using other ALSPs like Axiom and LOD.
“Not surprisingly, there also has been a significant corresponding decrease in UK legal buyers saying they were not using any alternative legal service providers, signalling that the ALSP sector continues to move into the mainstream.”
This begged a new question, the report went on: “To what extent has the cultural shift around remote and flexible legal work led to in-house departments and GCs becoming more comfortable with alternative types of service?
“And to what extent was the use of ALSPs made more necessary during the pandemic, given higher levels of absence due to illness or caring responsibilities during the crisis?”
“These questions should give outside law firms reason to pause, as the traditional law firm sector may have to proactively protect its turf from further encroachment by alternative providers.”
When asked what skills were high on their ‘wish list’ for external lawyers, the most popular choice for corporate counsel was deep understanding of their businesses, cited by 28%. This was followed by technological skills and business acumen, both on 27%.
Being cost effective and staying up-to-date with legal changes were much less important, both cited by only 11%.
When asked what made law firms stand out to them over the past year, specialist knowledge led the way (16%), followed by breadth of service (12%) and knowledge of the sector (9%).
The national or regional coverage of law firms, their track record and professionalism were all less important.
Researchers commented: “Following the crisis phase of the pandemic where clients turned towards tried-and-tested historic relationships, they now clearly have shifted their desires to favour those law firms and new law providers that can offer strength and depth to better service their clients’ holistic needs.”
The report found that dealing with the impact of Covid-19 was still the main strategic priority for the buyers of UK legal services (21%).
This was followed by complex and changing regulation (19%) and technology (17%) ahead of concerns about the volume of legal work, operational efficiency, company growth, ESG (environmental, social and corporate governance) and climate change.
When it came to their most used technology solutions, the list was headed by e-signatures (82%), legal research (71%), practical know-how (56%) and e-billing (50%).
Compliance tools (44%), document management (35%) and knowledge management (32%) were all less popular.
Researchers said this meant “a raft of legal technology tools and solutions” were not being used by a majority of law departments, “including such commonly used technologies as document and contract management systems, e-discovery programs, and compliance tools”.
They said the changes in how clients viewed external law firms came “amid a backdrop of growing optimism around clients’ legal spending”, indicating that they were willing to pay for quality legal services.
“Yet, as competition increases from the Big Four and other alternative legal service providers, it will be those forward-looking UK law firm leaders that will take the necessary initiative to cement their firms into the minds of legal buyers in the UK and around the world.”