The Surge in Demand for Legal Services: A Vital Shift for Modern Businesses
In recent years, the United Kingdom has witnessed a significant surge in the demand for lawyers. According to the Law Society’s latest statistics report, there has been a 21.9% increase in the number of people holding a practicing certificate in the last decade and a steady increase of the proportion of these lawyers working in-house (now making up more than a quarter of the profession).
But what is driving this demand and what does this mean if you are responsible for
legal compliance for your company?
1. Risk Management and Compliance
The 2023 State of the U.K. Legal Market Report by Thomson Reuters Institute revealed that increasing regulatory complexity was identified as the most significant risk on the horizon.
With an increasingly complex regulatory landscape, and more legislation adopting a strict liability approach placing the onus on businesses to prove they are compliant, the regulatory burden faced by businesses is only becoming greater. Adopting a proactive approach can identify and mitigate risks before they become significant issues (whether reputationally or from a
cost perspective). However, the required skill set for this proactive approach does not necessarily exist in other business functions and therefore organisations either need to outsource or increase headcount.
2. Cost Efficiency and Control
There are 2 interconnected trends that differentiate the UK legal market from other jurisdictions:
- The strategic priorities of legal functions in UK organisations place significantly more weight on efficiency and cost saving when it comes to legal support (according to the 2023 State of the U.K. Legal Market Report by Thomson Reuters Institute, UK respondents’ strategic priorities compared to global peers: 22% v. 12% re “Improve efficiency/processes/more with less” and 24% v. 19% re “Cost control/cheaper”).
- Law firms’ costs continue to increase and be passed on to clients – the Law Society’s latest Financial Benchmarking Survey shows that the median fee income of the 147 firms surveyed rose for the 14th consecutive year, including a 6.8% increase from the previous year.
Against this background, the cost-benefit analysis of hiring an in-house lawyer and having more predictable costs can be attractive. However, there are risks:
- businesses can have unrealistic expectations of what a lawyer will be qualified to do (for example a conveyancing lawyer is unlikely to be comfortable or provide quality advice in relation to a commercial litigation and vice versa); and
- with the current pay war in private practice (newly qualified lawyers at some London firms are now receiving base salaries of £180,000) there is a growing gap in potential salary that may be insurmountable.
3. Business Alignment and Strategic Counsel
In-house lawyers are uniquely positioned to understand the intricacies of their company’s operations, goals, and challenges. This enables them to provide tailored legal advice that aligns with the overall business strategy. A report by Addleshaw Goddard found that the majority of executives at large FTSE listed companies felt that in-house legal functions had a ‘high’ level of alignment with the businesses’ priorities.
Conclusion
The rise in demand for lawyers in the UK reflects a significant shift in the burden placed on businesses. In meeting this challenge, businesses have increased the headcount of legal teams and explored technology. However, there is no silver bullet that will apply to all companies to meet this challenge. Balancing cost efficiency, quality, business alignment, and effective risk management will be key.
At Lex Stratum, we have adopted an approach that seeks to combine the best aspects law firms, in-house counsel and day-rate contractors to help companies meet their strategic legal and business objectives. Whether it is leveraging the buying power of our clients to drive value with specialists, providing on-site legal support, or utilising products and tools to proactively identify and mitigate risks, we are here to support your business.
Further reading:
https://www.lawsociety.org.uk/topics/research/annual-statistics-report-2022 (published 7 December 2023)
https://www.pwc.co.uk/industries/legal-professional-business-support-services/law-firms-survey.html
https://www.lawsociety.org.uk/topics/research/financial-benchmarking-survey-2024
