Many UK Top 100 Law Firms Concerned about Falling Behind Rivals on AI use


GDPR and intellectual property most likely growth practices in the coming year

More than a quarter (28%) of finance directors at the UK’s Top 100 law firms polled by Thomson Reuters see falling behind their rivals in implementing Artificial Intelligence (AI) technology as “a significant risk to profitability.”

Law firms are investing heavily in AI to speed up labour-intensive tasks, such as reviewing contracts, analyzing documents as part of M&A due diligence, or finding electronic documents to respond to discovery requests in litigation. By automating processes, AI enables law firms to both free up fee earners’ time for higher value work, and to deliver better quality work for clients.

Some law firms are developing their own AI technology, while others are investing directly into AI and other legal tech businesses.

Samantha Steer, director of Large Law Strategy at Thomson Reuters says: “Properly deployed, Artificial Intelligence should allow law firms to both lower their cost base and win new work.

“However, law firms also know that not all of the investments that they make in developing AI technology will necessarily produce a return, and talent in this area is expensive. That makes some firms nervous about building software from scratch themselves.”

The researchers also found that pressure to reduce fees from clients is seen as the biggest challenge to profitability, with 46% of FDs polled describing it as a high risk to their profitability.

In response to the pressures on profitability, 69% of the FDs polled by Thomson Reuters said they would be likely to cut unprofitable services over the coming year, up from 42% looking to make cuts five years ago.

Other possible measures to improve profitability that may be taken by FDs over the next year include:

  • 56% would be likely to put more work through junior staff to improve profitability
  • 50% would use technology in more areas of their business as a means to cut costs
  • 47% would be likely to make lateral hires of senior teams from rival firms

Samantha Steer adds: “Keeping fees low or at least in line with competitors can often be crucial to winning business, especially in practices and matter types where competition is most intense or where legal advice is seen as more of a commodity.

“It is why we see a constant effort by many law firms to ensure that they are evolving into the higher-value, non-commoditised end of the legal market.” 

Intellectual Property and GDPR most-likely areas of growth; construction and commercial property most likely to decline 

57% of FDs at Top 100 UK law firms polled by Thomson Reuters predict growth in Intellectual Property (IP) work in the next year. This has risen from just 8% last year. Areas of tech innovation such as electric cars, autonomous vehicles and AI continue to generate record levels of patent applications and other IP that needs protecting.

Law firm FDs predict that the second most-likely area of growth will be work related to the General Data Protection Regulation (GDPR) introduced May 2018, with 56% of FDs polled identifying GDPR as a likely growth area over the next year.

The proposed fines by The Information Commissioner’s Office (ICO) on a major British airline (£184m) and a UK based hotel group (£99m) in July 2019 have highlighted to companies the potential cost of failing to comply with GDPR laws.

Samantha Steer adds: “The scale of fines that the ICO plans to impose are the kind of size that keeps boards up at night. GDPR looks to be a growth area for law firms for years to come.”

On the other side, law firm FDs expect a number of areas of legal work to contract over the next year with commercial property seen as the most likely at 40%, up from 8% last year. A quarter (25%) also expect construction work to contract over the coming 12 months.

Pin It on Pinterest