UK law firms “turn to tech rather than job cuts” to adapt to future

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UK law firms are preferring to adopt new technology rather than cut staff to address the current economic climate when compared to their US and Australian counterparts, new research has found.

UK firms were also more likely, by small margins, to increase their fees and cut costs.

Global legal tech firm Litera gathered responses from 314 law firm managers for Navigating the Legal Horizon. A third of the firms were in the UK, a third in the US and just under a third in Australia, with the remainder in Europe and Canada.

Six out of 10 UK law firms said they would be adapting to the current economic climate by adopting new technology to “increase efficiencies”. This compared with 48% of US firms and only three out of 10 in Australia.

More than half of UK firms said they were increasing fees to cope with economic changes – 57%, compared to 53% for US firms and 46% for Australian firms.

Cutting costs, such as business travel, marketing or entertainment, followed a similar pattern, with 55% of UK firms doing this – just ahead of the US.

However, UK law firms were much less likely to be reducing headcount. Only a fifth of UK firms were doing this, compared to a third of US firms and almost a half of Australian firms.

US firms led the way when it came to changing their pricing models, with 55% of firms taking this approach, compared to 51% in the two other countries.

Almost all (92%) UK firms’ work involved alternative fee arrangements for nearly half or more of their work, with flat fees the most common in the UK.

Almost two thirds of law firms across the three countries supported phasing out the billable hour, which was seen as “outdated”, “not aligned with client interests” and “less efficient”.

Three-quarters of all law firms (73% in the UK) said the new technology they were most likely to adopt over the next 12 months was artificial intelligence (AI) to improve “efficiency, profitability, and overall value creation”. This was followed by cybersecurity protection solutions and all-in-one legal platforms.

Barry Solomon, vice-president, M&A integration at Litera, said in his foreword to the report: “Clients are becoming more sophisticated and want to talk about value instead of just hours.

“GenAI will likely feed into this both by making some types of legal services more efficient and predictable, and by providing the insight necessary to craft more accurate AFAs. GenAI will accelerate what’s already happening in the space by providing more transparency.”

Avaneesh Marwaha, chairman of the board at Litera, added: “It is really encouraging to see how UK law firms are adapting to the current economic climate by adopting new technology.

“Out of all the regions surveyed, the UK had the lowest number of firms reporting that they plan to reduce headcount, suggesting that the implementation of new technologies has created confidence in their ability to enhance their profitability and operational efficiency.”


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