External spend: Hourly rates continue to dominate
Nearly three out of 10 corporate general counsel (GCs) plan to cut spending on external lawyers – the highest proportion since 2020, a report has found.
A majority said they also expected a higher proportion of legal work to be carried out in-house in five years’ time, a view shared by only a third of external lawyers.
Researchers said 28% of corporate legal departments, all of them global companies with turnovers of at least £39m, said they planned to decrease their total legal spend in 2025, a rise of six percentage points from the previous year and the highest since the figure hit 32% in 2020.
The proportion of GCs saying they would increase spending remained static at 36%.
Researchers commented: “As corporate legal teams become more selective with their external spend, they are more likely to consolidate work among a set of trusted legal service providers – those who can demonstrate efficiency, flexibility and alignment with business priorities.”
Regulatory work was the main practice area where GCs expected to increase spending, followed by corporate work, banking and finance, and employment.
Disputes, insurance and intellectual property emerged as the three most popular choices for lower spending.
The Thomson Reuters Institute interviewed 287 UK-based corporate general counsel last year for the State of the UK Legal Market 2025.
Just over half (54%) expected to handle a higher proportion of work in-house in five years’ time and only 11% less.
Just over a third of external lawyers (35%) believed that a higher proportion would be carried out in-house, and 14% a lower proportion.
Researchers said that “despite decades of discussion around alternative billing approaches”, hourly rates remained the foundation of law firm billing practices – 62% of GCs were billed this way, compared to 29% who were charged on a value-based approach and 9% who paid on a monthly or annual retainer basis.
But two-thirds anticipated that less of their work would be charged on an hourly basis in five years’ time.
On artificial intelligence, GCs were most excited about the potential of to “free up time to work on more complex/strategic work”.
Its ability to handle large volumes of data more effectively or improve efficiency/productivity were also mentioned; only 14% said they were “not excited at all”.
John Shatwell, head of legal professionals Europe at Thomson Reuters, said: “A growing number of general counsel 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.
“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.”
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