Companies reconsidering approached legal tactics due to escalating legal fees.
The Legal Landscape Shifts Toward In-House Teams and Alternative Billing Models
New research from Thomson Reuters indicates that 54% of UK in-house lawyers expect more legal work to be handled internally in the next five years. This trend is also being embraced by law firms, with 35% expecting increased work from corporate legal departments, according to the report.
John Shatwell, head of legal professionals Europe at Thomson Reuters, explained that the pressure to reduce costs is causing general counsels to consider insourcing more legal work. Additionally, they anticipate using Generative AI (GenAI) will enable external law firms to decrease their fees.
The study also noted that there's a growing anticipation among general counsels (64%) and law firms (58%) to move away from hourly rates. Typically, law firms have relied on this system to calculate their charges, billing based on the total hours lawyers work on a case. However, the increased use of AI at firms has led clients to demand changes to this pricing model.
As senior business leaders face pressure to cut legal expenditure, government reforms have led to an increase in demand for employment lawyer services. In fact, 10% of respondents expect to raise their spending on employment law advice, given the ongoing parliamentary debate of the employment reform package.
The demand for employment lawyers surged since the Employment Rights Bill was announced in the Autumn Budget, causing a nearly 34% rise in employment law vacancies in 2024, reveals a recruitment report.
In terms of billing models, clients expect high-level strategic counsel from their law firms but also want to benefit from any productivity savings that new GenAI tools would provide. According to Shatwell, this shift is primarily happening through a shift to value-based billing, which prioritizes cost transparency and improved outcomes for clients.
In conclusion, the legal industry is evolving as it adapts to new business strategies, technological advancements, and client demands. The movement towards in-house teams, the decline of traditional hourly billing, and the expansion of AI usage are some key trends that are set to define the future of legal work. Adaptability, business acumen, and a client-centric approach are becoming increasingly valuable alongside legal expertise, ensuring firms and organizations maintain agility in this rapidly changing landscape.
- The shift towards in-house teams and the decline of traditional hourly billing in the legal industry indicates the rise of new financing strategies in business, particularly value-based billing that prioritizes cost transparency and improved outcomes for clients.
- As the legal industry embraces advancements in AI, it is not only influencing the pricing models used by law firms and the increased demand for employment lawyers, but it is also causing a significant shift in the economy and industry, where productivity savings and strategic counsel are highly valued alongside legal expertise.
