Key insights:

• • • Nature-related risks underreported — Companies’ nature-related interfaces are underreported across industries, despite being increasingly seen as decision-useful information for investors and regulators.

    • Stricter requirements for disclosure growing — Both voluntary and mandatory frameworks are increasing their requirements for nature-related disclosure.

    • Organizations should be proactive — Getting ahead of disclosure trends means that organizations should be measuring their nature-related interface as well as integrating nature-positive transition planning to their business strategy.

As the impacts of nature loss become more prevalent, companies are on business risk and performance. This is due to both physical nature-related impacts and increasing stakeholder pressure on organizations to integrate long-term nature-positive strategies. Managing nature-related impacts and dependencies is a framework-driven mandate for all boards of directors to consider.

Why nature matters

All businesses impact and depend on the four realms of nature: land, freshwater, ocean, and atmosphere to some extent, with the highest impact sectors being . These dependencies could include the provision of water supply to an organization, or services provided by nature to a business, such as flood mitigation. A could result in a $2.7 trillion GDP decline annually by 2030. In turn, most businesses also positively and negatively impact nature.

Financial flows that were determined to be harmful to biodiversity reached , including private investment in high impact sectors, with only $213.8 billion (€184.6 billion) invested in conservation and restoration. Despite this financing gap, less than 1% of publicly reporting companies currently disclose biodiversity impacts, indicating the need to align incentives and policies with nature-related outcomes.

Indeed, nature does not have a single indicator, like greenhouse gas (GHG) emissions; instead, its measurement involves multiple complex, location-specific factors. Despite this, disclosure of nature-related risks and impacts are increasingly being required by regulators.

Regulatory incentives to disclose

The disclosures being driven by regulatory frameworks include material information on all nature-related risks, particularly those requested by the International Sustainability Standards Board (ISSB) and European Sustainability Reporting Standards (ESRS). The ISSB Biodiversity Ecosystem and Ecosystem Services project (BEES) was initially considered a research workplan but was modified to a standard-setting approach.

Through its work, the ISSB due to: i) the deficiencies in the type of information on nature-related risks and opportunities reported by entities, which are identified as important in investor decision-making; and ii) the requirement of nature-related information that is not included in climate-related disclosures, including location-specific information on nature-related interface and nature-related transition planning.

On Jan. 28, all 12 ISSB members voted to , which included two important implications. One is that standard setting is to cover all material information on nature-related risks and opportunities that could be expected to affect an entity’s prospects. And two, it mandated that entities applying International Financial Reporting StandardsĚýS1 and S2 for climate-related disclosures supplement these with nature-related risks and opportunities disclosures as well.

Similar to the ISSB requirements to report material nature-related risks and opportunities, the ESRS also requires information to be disclosed for material impacts, risks, and opportunities found in an entity’s double-materiality assessment. The Task Force on Nature-related Financial Disclosures (TNFD) and its European counterparts have been in close collaboration since 2022, and all 14 TNFD recommendations have been incorporated throughout the ESRS environmental standards.

Companies that are required to comply with the EU’s sustainability reporting mandate also will be required to collect similar data for their future ESRS data points disclosure.

Alongside regulatory requirements, there are voluntary requirements and investor pressure to consider for many organizations. These include investor coordination initiatives on nature such as Nature Action 100 and considering which investors look at Carbon Disclosure Project (CDP) data.

To use the CDP as an example, 650 investors with $127 trillion in assets they needed in 2025. Further, the CDP is increasing its disclosure requirements for nature-related data in its questionnaire as it progresses to . This includes, for example, requiring disclosures on environmental impacts and dependencies for disclosers, enhancing commodities included in the forests questionnaire, and introducing oceans-related questions in 2026.

All of these heightened requirements underscore the need to measure a company’s nature-related impacts and proximity to its nature-related issues.

Implications for company boards

To align with these additional requirements and investor expectations, corporate decision-makers should consider the questions they are asking related to nature, as well as what data is being collected in relation to the organization’s impact on nature. The following steps can give leaders a starting point for how boards should consider this information:

Track relevant developments in regulatory and investor standards — Ensure there is a management-level understanding of how nature is considered in relevant standards for the company based on its current and anticipated locations of operation and specific industry.

Measure nature-related risks and opportunities — Given that identifying material nature-risks, with a particular focus on location specificity, is a common first step across current mandatory and voluntary regulatory frameworks, organizations should conduct a regularly updated, location-specific assessment on the company’s interface with nature, especially in instances in which these issues are material. Organizational leaders should also produce financial quantification of these risks within an overall materiality assessment and corporate risk register. For guidance, the best practice across these regulatory and disclosure frameworks is to utilize the .

Make further disclosure of any material nature-related information, including financial quantification — Frameworks such as the ESRS require further disclosure of any risks that are found to be material, including financial quantification and scale of the risk.

Integrate mitigation of nature-related risks in business strategies — Upcoming standards and research, such as that from the ISSB, indicates that missing disclosure includes company’s nature-positive transition planning. Consider how to integrate nature into long-term business strategies for full alignment with upcoming regulations and standards, including establishing nature-related governance.

Adopting these processes and integrating nature into corporate decision-making will provide corporations with a more future-proof and resilient business model. The increased adoption of nature within these frameworks is driven by the clear economic impact that our current loss of nature is having. This will only continue to become more of a priority as the impacts of nature loss are increasingly felt worldwide.

You can find out more about theĚýsustainability issues companies are facing around the environmentĚýhere

Key takeaways:

• • • An emerging employment tribunal crisisĚý— The UK’s employment tribunal system is facing unprecedented backlogs, long wait times, and unaffordable legal representation, leaving many workers and small businesses unable to effectively resolve workplace disputes.

    • Process-oriented barriers to justiceĚý— Most claims are dismissed not because they lack merit, but due to claimants disengaging from a slow and complex process, with legal costs often exceeding the value of claims and legal aid unable to meet rising demand.

    • A potential role for legal technologyĚý— Mission-driven legal tech platforms are emerging to provide affordable, scalable support and help claimants stay engaged by offering a practical solution to improve access to justice.

When a worker in the United Kingdom is unfairly dismissed or denied wages, their path to resolution runs through employment tribunals, a specialized court system separate from civil courts. As in the United States, many workers and small businesses cannot afford legal representation and must navigate the process on their own.

With backlogs at all-time highs and affordable legal services at all-time lows, this system is coming under increasing pressure. Fortunately, mission-driven technology and data analysis are emerging to level the playing field and increase access to justice.

Current state by the numbers

According to an analysis of the and other data sources,*Ěýin the second quarter of 2025, employment tribunals resolved just 45% of incoming claims, adding 18,000 cases to the backlog alone. In the past year, the open caseload has surged by 244%. This pressure is set to intensify as the inbound Employment Rights Act 2025 — the UK’s most significant overhaul of workplace protections in decades — is set to extend protection to six million more workers in 2027.

As the backlog increases, so do wait times. In 2025, the average wait for resolution reached 25 weeks, more than double that of 2024, with some claim types like equal pay and discrimination claims reaching up to 37 weeks. Some more complex cases are reported to have their final hearings scheduled as far out as 2029.

With only 8% of cases reaching a final hearing and the majority resolved through settlement or withdrawal, the growing backlog raises concerns about whether lengthy wait times influence how claimants choose to resolve their cases.

In the UK, a common threshold for legal affordability is a salary of ÂŁ55,000, meaning around 65% of workers cannot afford legal representation. Legal aid and pro-bono services exist to support those in need, but with growing funding constraints and rising demand, these services cannot reach nearly two-thirds of claimants.

You can find more insights about how courts are managing the impact of advanced technology fromĚýour Scaling Justice seriesĚýhere

Tribunal awards are largely calculated from salary. This can result in a claim’s value often being lower than the cost of legal representation to pursue it. In a typical hospitality case, for example, a worker owed ÂŁ1,500 in unpaid wages (equivalent to 3½ weeks of pay) has a 92% chance of representing themselves and will wait on average six months for resolution — without pay owed, legal support, or outcome certainty.

The cost, both in time and resources, also falls on employers. In lower-margin industries such as hospitality, default judgments, in which an employer does not engage with proceedings, can reach as high as 37%, compared with a national average of around 6%. For these employers and for smaller businesses more broadly, the cost of legal support may also exceed the value of defending a claim.

With rising costs and growing delays, the risk for both employers and employees is that the system becomes inaccessible, leading to outcomes shaped by who can afford to sustain the process rather than case-by-case strength.

Where justice tech fits

The conventional assumption is that self-represented claimants are at a significant disadvantage when they go to court; yet the data is more nuanced. Self-represented claimants who reach a hearing prevail 44% of the time, compared to 52% for those with legal representation — a gap of less than eight percentage points.

The greater risk is not losing at hearing but never actually reaching one. Analysis of more than 2,700 struck-out, or dismissed, cases by employment rights platform Yerty found that the majority were dismissed not for lack of merit, but because claimants stopped engaging with the process. Only 6% were struck out for having no reasonable prospect of success. This suggests that the primary barrier may not be the absence of legal representation, but the ability to sustain engagement with a slow, complex, and often opaque process.

Increasing numbers of UK workers turning to AI tools like ChatGPT for legal support highlight not only the demand for affordable access but also the risks of general-purpose tools being used in legal contexts. Fabricated case law in tribunal submissions, for example, harms users and adds further pressure to an already overstretched system.

The conventional assumption is that self-represented claimants are at a significant disadvantage when they go to court; yet the data is more nuanced.

A new generation of legal technology platforms is emerging to fill this gap, with tools purpose-built for the specific circumstances of employment law. Yerty and Valla, among others, offer AI-powered guidance tailored to the UK tribunal process, providing affordable, scalable support previously out of reach for most workers. Government organizations are also moving in this direction. For example, in its recent five-year strategy outlook committed to exploring new digital services that offer faster, more accessible support.

Technology alone cannot address underfunding, judicial capacity, or fundamental power imbalances. However, if the majority of dismissed claims stem from disengagement rather than weak cases, and self-represented claimants prevail at comparable rates to those with lawyers, then the answer isn’t more lawyers — it’s better support upstream. Mission-driven legal technology can provide consistent, scalable guidance that helps both parties manage the process and avoid falling through the cracks.

The UK government’s own assessment of the Employment Rights Bill forecasts a 15% increase in claims by 2027 due to expanded eligibility. As noted above, the system is already under significant pressure before these reforms take effect, and traditional responses — more judges, more funding — too often take years to deliver.

While not a complete answer, justice tech can help address a real, measurable problem, that of keeping people engaged in a process that too often disengages them. For a hospitality worker owed back pay, a healthcare worker facing unfair dismissal, or a retail employee navigating a discrimination claim alone, that support could mean the difference between a case heard and one abandoned — and justice delayed or justice denied.

*Sources: Ministry of Justice Tribunal Statistics Quarterly (July-September 2025); Yerty analysis of 2,721 struck-out tribunal decisions and 8,761 case outcomes; ACAS Strategy 2025-2030; 2024 UK Judicial Attitude Survey, UCL Judicial Institute / UK Judiciary, February 2025.

Key insights:

• • • UK lawyers see the future first — 87% of UK legal professionals predict AI will significantly impact the profession within five years, significantly higher than the global average of 79% and positioning British lawyers as particularly prescient about technological change affecting legal practice.

    • Individual AI fluency is becoming the new professional differentiator — Legal professionals who regularly use AI report better work-life balance, accelerated skill development, and enhanced client value delivery, while those who don’t risk falling behind in an increasingly competitive market.

    • The client relationship is evolving rapidly — UK corporate legal teams are pioneering AI automation, with 50% expecting high or transformational change in their own departments within 12 months, creating new expectations for external counsel and reshaping how legal services are delivered and valued.

An exclusive preview for Practical Law survey respondents

Being a lawyer in the United Kingdom today means being part of a profession that’s in the midst of its most significant transformation in generations. While the legal industry has always been defined by precedent and tradition, today’s modern legal professional must also be defined by adaptability, technological fluency, and a willingness to reimagine how excellent legal work gets done.

New market research from the ¶¶ŇőłÉÄę Future of Professionals 2025 report reveals that British lawyers are not just witnessing digital transformation — they’re leading it. The report surveyed 172 UK legal professionals as part of a broader study of 2,275 professionals globally across legal, tax, audit, accounting, and risk & compliance sectors. However, the recent research also exposes a crucial gap that every UK lawyer needs to understand: While they perhaps can see the future more clearly than their global peers, many of them aren’t yet equipped to thrive in it.

UK legal professionals lead global AI adoption despite implementation gaps

UK legal professionals have consistently demonstrated a pattern of embracing technological developments and new ways of working faster than their counterparts in other regions, particularly North America. The latest data shows this trend continuing, with 87% of UK legal professionals saying they believe AI will have high or transformational impact on the legal profession within five years. This outpaces their American legal counterparts at 75% and Canadian legal colleagues at 70%.

This deeper understanding of technological change isn’t just academic — it’s practical intelligence that’s already reshaping how the most successful UK lawyers approach their careers. Those who understand what’s coming are making different choices about skill development, client relationships, and career positioning. Yet, the research also reveals that while UK legal professionals are quicker to recognize this potential transformation, only 38% say they expect to see transformational change in their own organizations this year. This gap between recognition and implementation creates both opportunity and risk for individual professionals.

What separates tomorrow’s leaders from today’s

The research underpinning the Future of Professionals 2025 report reveals a fundamental truth about the modern legal profession: Individual AI proficiency is rapidly becoming the new differentiator between excellent lawyers and average ones. This isn’t about replacing legal judgment with technology, it’s about augmenting human expertise with tools that enhance accuracy, speed, and strategic insight.

UK lawyers who are already incorporating AI into their daily practice report significant benefits, including:

• • • Enhanced productivity without burnout — UK legal professionals expect to free up around 150 hours per year within 12 months. This represents enormous value that can be used to achieve greater volumes of work, or be redirected toward higher-level strategic work, business development, or simply better work-life balance.
    • Accelerated professional development — AI tools are enabling lawyers to handle more complex matters earlier in their careers by providing sophisticated analysis, precedent research, and document review capabilities that traditionally required years of experience to develop.
    • Improved client relationships — Lawyers using AI consistently report better client satisfaction through faster response times, more thorough analysis, and the ability to provide innovative solutions that purely traditional approaches couldn’t deliver.

In-house teams are changing the game

Perhaps nowhere is the transformation more evident than in UK corporate legal departments. The research shows that 50% of UK corporate legal professionals expect high or transformational change within their own departments this year, compared to just 36% predicting the same level of change within UK law firms. And almost half (47%) of UK corporate legal professionals surveyed say they are now regularly using AI-powered tools to start or edit their work — about double the rate within UK law firms.

“We are using chatbots and AI to automate routine operations with a goal to increase efficiency,” says one UK-based respondent from a financial services company. However, it isn’t just about internal efficiency — AI is set to fundamentally change the relationship between in-house counsel and external law firms.

Indeed, the implications for all UK lawyers are significant:

• • • For in-house counsel — You’re at the forefront of legal innovation, with opportunities to demonstrate strategic value by implementing AI solutions that drive business outcomes. Your role is evolving from legal advisor to strategic innovator.
    • For law firm lawyers — Your corporate clients are increasingly sophisticated AI users who expect their external counsel to match or exceed their technological capabilities. The law firms and individual lawyers who can’t demonstrate AI fluency risk becoming less valuable to these forward-thinking clients.

The skills that matter now

The modern UK legal professional needs to develop competencies that didn’t exist five years ago. Based on the research findings and emerging best practices, several skills are becoming essential, including:

• • • AI tool fluency — Understanding how to effectively use AI for legal research, document analysis, contract review, and strategic planning is crucial. This isn’t about becoming a technologist, it’s about becoming a more effective lawyer.
    • Quality control expertise — As AI handles more routine tasks, the premium skill becomes knowing how to review, refine, and monitor the quality of AI outputs to ensure they meet professional standards.
    • Strategic application — The ability to identify which legal tasks benefit from AI assistance and which require purely human judgment. This discernment is becoming as important as traditional legal analysis skills.
    • Client education — Modern lawyers must be able to explain AI capabilities and limitations to clients, helping them understand how technology enhances (rather than replaces) legal expertise.

The global Future of Professionals research reveals concerning gaps in AI adoption across different professional demographics. For example, Millennials are adopting AI at nearly twice the rate of Baby Boomers, creating potential competitive advantages for younger lawyers while leaving experienced professionals at risk of being perceived as outdated.

Age isn’t destiny, however. The lawyers thriving in this environment, regardless of career stage, share common characteristics, such as a curiosity about new tools, willingness to experiment, and focus on how technology can enhance client or business value rather than simply reduce effort.

Practical steps for the modern UK lawyer

Whether you’re a newly qualified solicitor or a senior partner, certain actions can position you advantageously, including:

1. 1. 1. Understanding security and appropriate use first — Before using any AI tool, you should understand the critical distinction between public AI platforms and secure, professional-grade solutions. Tools like ChatGPT may be suitable for general research or educational queries, but they should never be used with confidential client data, privileged information, or sensitive commercial details. Always check your firm’s policies and ensure any AI tools you use meet professional confidentiality and data protection requirements.
      2. Starting to experiment safely — Once you understand the security parameters, begin exploring AI tools relevant to your practice area, starting with non-confidential applications. The lawyers who will lead tomorrow are those who are learning today, but they’re doing so responsibly.
      3. Focusing on client and business impact — When evaluating AI tools, you should ask how they enable you to deliver better outcomes for clients or for your business, not just how they make your work easier.
      4. Developing quality standards — You should create personal protocols for reviewing and validating AI outputs. This expertise will become increasingly valuable as AI use becomes ubiquitous.
      5. Staying professionally current — It would be smart for you to join discussions, attend seminars, and engage with peers about AI developments in legal practice. Professional competence now includes technological awareness.
      6. Documenting your learning — You need to keep track of how AI tools improve your work quality and efficiency. This evidence will be valuable for your career advancement and client development conversations.

Professional identity shift

Being a modern legal professional in the UK means embracing a fundamental shift in professional identity. The lawyers who will thrive are those who see themselves not just as legal experts, but as legal problem-solvers equipped with cutting-edge tools.

This doesn’t diminish the importance of traditional legal skills, such as analytical thinking, advocacy, client counseling, and ethical judgment remain fundamental. Rather, it enhances these capabilities with technological tools that amplify human expertise.

The research suggests we’re moving toward a legal profession in which AI fluency becomes as expected as legal research skills or professional writing ability. The lawyers who embrace this evolution early will shape the profession’s future and enjoy competitive advantages throughout their careers.

The choice ahead

Today, every UK lawyer faces a choice about how to respond to this technological transformation. The research reveals that those who engage proactively with AI tools — learning their capabilities, understanding their limitations, and applying them strategically — report higher job satisfaction, better client relationships, and more optimistic career prospects.

Those who wait, hoping the transformation will slow or somehow bypass them, risk finding themselves increasingly disadvantaged in a market in which AI-enabled colleagues can deliver superior results more efficiently.

The modern legal professional in the UK has an unprecedented opportunity. British lawyers’ superior foresight about technological change, combined with the UK’s position as a global legal services hub, creates unique advantages for those willing to seize them.

The future belongs to lawyers who can seamlessly blend traditional legal excellence with technological sophistication — professionals who understand that in tomorrow’s legal marketplace, the question isn’t whether to embrace AI, but rather, how quickly and effectively you can learn to use it in service of your clients, your business, and your career.

This transformation is happening now. So, UK lawyers need to ask themselves: What kind of legal professional will I choose to become?

You can download your copy of theĚý2025 Future of Professionals Report here

• • • Corporate GCs are focused on serving their businesses as strategic enablers and expect the same from their outside counsel

    • GCs increasingly demand advice that is proactive, clear, actionable, and aligned with broader business needs

    • Law firms that fail to meet these expectations risk being replaced by another law firm or an alternative provider

The legal landscape in the United Kingdom is experiencing a fundamental transformation, driven by economic uncertainty and rapid technological advancement. As corporate legal departments navigate these challenging waters, their expectations of outside counsel are evolving dramatically. Technical competence, while undoubtedly necessary, is no longer sufficient. Instead, UK general counsel (GCs) are increasingly expecting that their outside law firms evolve into true strategic business partners that can deliver measurable value beyond billable hours.

The shift from technical advisors to strategic enablers

Corporate in-house legal teams are increasingly focused on positioning themselves as trusted strategic advisors to their C-Suite; and in turn, they expect their external legal partners to support this same end, according to the Thomson Reuters Institute’s State of the UK Legal Market 2025 report. Indeed, the conclusion is clear: solid technical advice is no longer enough for law firms to maintain a competitive advantage in the legal services market.

“Corporate legal teams place more trust in firms with strong reputations and deep industry knowledge that can help them drive strategic discussions with their organization’s leaders,” the report states, noting that this development represents a significant departure from the traditional model in which law firms were valued primarily for their legal expertise and ability to navigate complex regulatory frameworks.

However, today’s economic climate has intensified pressure on corporate legal departments to demonstrate clear value while controlling costs. According to the report, 28% of UK-based corporate legal departments are planning for their legal spend to decline in 2025. That represents an increase of 6 percentage points from the 22% that had anticipated a spending decrease in 2024. And UK GCs have proved that they know how to make these reductions happen, even as corporate matter volumes and law firm billing rates both increase. Clever GCs are becoming increasingly selective about how they allocate their external legal budgets, opting for lower-cost law firms or, in an increasing number of instances, alternative legal service providers (ALSPs).

This cost consciousness has fundamentally altered the value proposition that law firms need to offer in order to secure work matters. As one technology industry in-house counsel quoted in the report noted: “Our job is to provide cost effective, valuable legal advice to our function teams in the next 12 months. The priority would be to find an efficient way of doing this.”

Corporate GCs are no longer willing to pay premium fees for legal work that can be automated, streamlined, or just as easily performed in-house. Instead, they’re seeking legal partners that can help their in-house teams achieve their broader business objectives while delivering measurable efficiency gains.

The four pillars of modern legal partnership

In the report, UK GCs identified several key areas in which they expect their law firms to excel beyond traditional technical competence:

1. 1. 1. Business-aligned strategic thinking — Corporate legal teams want law firms that understand their industry, business model, and strategic objectives. This means providing guidance that goes beyond legal compliance to support business growth and competitive positioning. Law firms must demonstrate deep sector knowledge and offer insights that help drive strategic discussions at the boardroom level.
      2. Proactive communication and responsiveness — The report underscores that GCs “appreciate law firms that are proactive, communicative, and responsive.” This expectation extends beyond mere availability to encompass anticipatory guidance and regular strategic check-ins that keep legal issues from becoming business problems.
      3. Clear, actionable advice — GCs emphasize the critical importance of “simplifying complex legal advice into clear, non-technical language, making it actionable for business leaders and stakeholders without legal backgrounds.” Law firms that can translate legal complexity into business-focused recommendations position themselves as indispensable strategic partners.
      4. Value-added services — Beyond individual matters, corporate legal teams value outside firms that offer thought leadership content, training sessions, and informational resources that reinforce expertise while providing ongoing value to the organization.

Technology as a catalyst for change

Not surprisingly, the rise of AI and legal technology is accelerating the shift away from hourly billing model and toward outcome-based value delivery. GCs are optimistic about the potential impact of these changes with 41% of respondents expressing excitement about AI’s potential to free up time for complex and strategic work. At the same time, 18% of GCs also see technology as a means to handle increasing data volumes more effectively.

This technological transformation is forcing law firms to reconsider how they position their value to GCs. As routine tasks become automated, focus increasingly will shift toward strategic thinking, business judgment, and the ability to synthesize complex information into actionable business intelligence. And those law firms that fail to evolve beyond their role as technical service providers will risk losing market share to more strategically minded or even lower-cost competitors and ALSPs. In fact, the report notes that almost two-thirds (65%) of UK respondents said their corporate legal departments already work with firm-affiliated or independent ALSPs — a significantly higher portion than their counterparts in the United States, at 52%.

These shifts reflect a willingness on the part of GCs to unbundle traditional legal services, reserving high-value strategic matters for law firms but being more selective about which firms have demonstrated clear business value.

What GCs want

The report made clear that there are a few key criteria that GCs in the UK are looking for in their outside law firms, including:

• • • deep industry expertise and sector-specific knowledge;
    • investment in client relationship management that goes beyond individual matters;
    • value-added services such as training programs and thought leadership;
    • technology solutions that demonstrate efficiency and cost-effectiveness; and
    • restructured pricing models that better align with client outcomes rather than time spent.

The message from UK general counsel is clear: The legal market is moving beyond technical competence toward strategic partnership — and outside law firms that want to succeed need to make that move.

GCs have an increasing set of demands being placed upon them, and those law firms that recognize this shift and actively work to become trusted business advisors will have greater opportunity to thrive in this new environment. Those that cling to traditional models of legal service delivery, however, risk being relegated to commodity status or replaced entirely by more agile alternatives.

You can download a copy of the Thomson Reuters Institute’s State of the UK Legal Market 2025 report here

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State of the UK Legal Market 2025 Report

A new report from the Thomson Reuters Institute, State of the UK Legal Market 2025, provides a comprehensive analysis of these changes and offers valuable insights for UK law firms and corporate legal departments alike. Many of the findings from the report underscore that law firm leaders should place a strong emphasis on adapting to these evolving dynamics.

Emphasis on value & efficiency

One of the most prominent themes in the report — compiled from a variety of primary research projects conducted by the Thomson Reuters Institute throughout 2024 and consisting of interviews with more than 450 UK-based corporate general counsel (GCs), corporate legal professionals, and UK law firm lawyers — is the shift towards value and efficiency.

The report shows that GCs at UK-based companies are increasingly focused on driving productivity and positioning themselves as strategic partners to the C-Suite. This means that their outside law firms must go beyond simply providing technically sound advice and start offering solutions that deliver meaningful value. As this focus on value sharpens, the traditional billable hour model is being scrutinized as clients seek more transparent and flexible pricing structures. Today’s GCs are expressing ever greater interest in value-based pricing and alternative fee arrangements.

The report also highlights the transformative impact of AI and technology on the legal industry. Corporate legal teams are optimistic about AI’s potential to simplify and streamline processes, prompting a reassessment of how and when they allocate work to outside legal service firms. Clearly, those law firms and alternative legal services providers (ALSPs) that embrace AI stand to gain a larger share of the market by offering cost-effective solutions to budget-conscious clients. The ability to leverage technology to boost productivity and drive efficiency is becoming a critical differentiator in the legal market.

Clients are under increasing budgetary pressures, which is driving a demand for cost certainty, further feeding the desire for value-based services. Clients are looking for law firms that can provide tailored guidance grounded in industry expertise and aligned with clients’ broader strategic goals. This means that law firms need to be proactive, communicative, and responsive, doubling down on efforts that many firms have been pushing for years.

The shift towards in-house work

Another significant trend identified in the report is the shift towards bringing more legal work in-house. More than half of respondents from UK corporate legal departments said their departments expect to increase the volume of work they handle internally over the next five years, driven by the need to meet tighter budgets, advances in AI and technology, and a focus on expanding internal capabilities. Outside law firms must adapt by offering innovative service models that align with the evolving expectations of today’s legal departments.

Not surprisingly, ALSPs are emerging as key players in the UK legal market. Their value proposition includes specialized expertise, tech-enabled cost efficiency, and the ability to manage high-volume tasks at scale. They can also leverage different areas of expertise than those demonstrated by traditional law firms. UK corporate legal departments are leading the way in ALSP adoption globally, the survey shows, with 65% of departments already working with firm-affiliated or independent ALSPs. This trend presents both a challenge and an opportunity for traditional law firms, which must find ways to collaborate with ALSPs to deliver integrated, cost-effective solutions.

Conclusion

UK-based Law firms that are willing to adapt their approach to the practice of law and client-service delivery by embracing flexible pricing, technology adoption, and client-aligned service-model innovation will be better positioned to capture the opportunities emerging in the UK legal market.

However, those law firms that do not respond to today’s increasing pressures may find themselves quickly at risk of losing market share to other law firms that are taking a more proactive approach, ALSPs that are finding new and innovative ways to compete, or even to the in-house legal teams of the very clients they are hoping to serve.

You can download

a full copy of the Thomson Reuters Institute “State of the UK Legal Market 2025 Report” by filling out the form below:

Modern slavery, forced labor, and human trafficking are interconnected concepts with significant overlap. Modern slavery is an umbrella term encompassing both forced labor, which involves work performed involuntarily under threat of penalty; and human trafficking, which entails the recruitment, transportation, and exploitation of individuals through force, fraud, or coercion.

All three concepts involve the exploitation of vulnerable people and deprivation of individual freedom. Common indicators include restricted movement, debt bondage, withholding of wages, retention of identity documents, and threats of violence or deportation. The key difference is that human trafficking specifically involves movement or recruitment of victims, while forced labor and modern slavery may occur without relocation.

Key regulatory approaches

Several jurisdictions have enacted laws requiring that companies conduct human rights due diligence or report on their efforts to address modern slavery risks in their supply chains. For example, the European Union’s Corporate Sustainability Due Diligence Directive mandates due diligence for large companies operating within the EU; while the United Kingdom, Australia, and Canada have modern slavery reporting laws that require companies to publish annual statements on their anti-slavery efforts. Also, the California Transparency in Supply Chains Act requires certain companies to disclose their efforts to eradicate slavery from their supply chains; and Japan has issued non-binding guidelines recommending human rights due diligence. The US and EU also have specific due diligence and reporting requirements related to conflict minerals.

Bans on imports is the second most common regulatory approach across jurisdictions, with these import prohibitions driving companies to conduct increased supply chain due diligence. Key national requirements include:

• • • The US prohibits imports of goods made with forced labor under Section 307 of the Tariff Act of 1930. This has been strengthened by the Uyghur Forced Labor Prevention Act (UFLPA), which created a rebuttable presumption that goods mined, produced, or manufactured wholly or in part in the Xinjiang region of China or produced by an entity on the are made with forced labor.
    • Canada and Mexico implemented similar import bans under the United States-Mexico-Canada Agreement.
    • The EU recently adopted a regulation prohibiting products made with forced labor from being placed on the EU market or exported.

Key features of an effective compliance program

Corporate compliance & risk professionals who want to design an effective due diligence program to combat human rights abuses in supply chains need to understand that this effort requires a comprehensive and adaptable approach with the flexibility to align with international standards while accommodating jurisdiction-specific requirements. Key components and steps to guide these efforts include:

Policy development — Develop and integrate a human rights policy into company operations, clearly stating commitments to eradicating human rights abuses. This policy needs to align with international standards, such as the and those of and any additional requirements of those jurisdictions in which the company operates where there are modern slavery laws. This policy should be communicated across the organization and its supply chain partners.

Risk assessment — Conduct a thorough risk assessment across the supply chain to identify areas in which modern slavery, forced labor, or human trafficking may exist. Engage stakeholders and those with more localized knowledge in this assessment process.

Set up due diligence processes for assessment of risks — Because clear due diligence processes are needed for consistency, companies should incorporate a systematic approach to regularly assess the effectiveness of their due diligence efforts by identifying and assessing potential human rights impacts and outlining prevention and mitigation of identified risks. This formal approach also should include clear metrics and indicators to measure progress and identify areas for improvement.

Create monitoring and reporting mechanisms, including on-site auditing — Companies should prioritize the implementation of comprehensive monitoring and reporting systems by establishing a consistent reporting schedule. They also should share findings with both internal and external stakeholders, create user-friendly reporting mechanisms that allow for easy data collection and analysis, and regularly review and update these systems to adapt to changing circumstances and emerging best practices in human rights compliance. Equally, protocols for open feedback channels and grievance mechanisms also are important for an effective due diligence system. In the case of forced labor compliance, it is particularly important to engage in regular on-site auditing.

Training and awareness — Implementing regular training for employees on the policies and procedures around identifying and addressing human rights abuses is an essential operational mechanism. Equally, training and building collaboration with supply chain partners are key to pinpointing and remedying human rights breaches.

Looking beyond the horizon

Moving forward, businesses must stay informed about emerging global trends, such as increased international cooperation and evolving legislation, to proactively address human rights abuses and maintain ethical supply chain practices. Indeed, the global landscape of regulations and enforcement actions targeting human rights abuses in supply chains continues to evolve rapidly, with more jurisdictions implementing due diligence requirements, import bans, or other measures to combat modern slavery, forced labor, and human trafficking.

Staying ahead of emerging requirements and potential regulatory changes will be crucial for businesses to mitigate risks and ensure ethical, compliant supply chains in this complex regulatory environment.

For more on approaches to Ěýhere

Intersection of EU’s sustainability taxonomy and CSRD presents challenges

There are a few key challenges for companies preparing to report on CSRD and the taxonomy, according to , Managing Director of Environmental, Social & Governance (ESG) at EY. For example, he points out that companies scoped into CSRD will also be scoped into reporting on the taxonomy which can present novel elements that may intersect with the CSRD. The EU taxonomy defines for organizations which of their activities can be categorized as sustainable by reference to a set of largely science-based criteria developed by the EU’s Platform on Sustainable Finance. The EU’s expectation is that this notion of green by law which the taxonomy introduces will help organizations reorient capital flows to focus more on sustainable investments and business activities.

A critical challenge of the taxonomy is the complexity of accurately classifying and reporting on business activities by referencing the eligible activities set out in the taxonomy. The taxonomy sets out more than 150 activities that can contribute to the EU’s sustainability goals across six environmental objectives, including climate change mitigation, adaptation, and pollution prevention, among others. Mapping nuanced business practices to taxonomy criteria is one of the first challenges companies will face.

Further, the taxonomy requires detailed reporting of financial metrics associated with sustainability criteria. The core taxonomy figures that need to be disclosed are the share of a company’s revenue, capital expenditures, and operational expenses that are sustainable. Finding the available data to answer these questions is a common challenge as many companies may not have collected data to be able to assess the sustainability of their activities in the way directed by the taxonomy. As a result, across both sustainability and controllership functions, it can be complex and resource-intensive for organizations to collect, assess, and report these key performance metrics (KPIs), especially to a level of confidence necessary to meet assurance requirements.

“Now is the time to accelerate [companies’] readiness efforts for CSRD and taxonomy… [and] assess the size of the problem.”

To better navigate the multi-layered complexity, it is important that organizations divide up the tasks into phases and remain focused and avoid becoming overwhelmed and feeling like the sustainability data is managing you.

Indeed, companies have often set out ambitious sustainability goals, and invested accordingly, in addition to making claims about the sustainability of their activities and products. After assessing in which taxonomy the activities in which they are engaged are included, along with the proportion of those activities that are green, companies also need to consider how the taxonomy criteria compare to their own proprietary claims about the sustainability of their products and practices.

To that end, taxonomy is partly intended as an anti-greenwash device and a framework for credentialing the seriousness and ambition of climate transition plans.

Double materiality assessment for in-scope activities also add complexity — Tomlinson explains that there are interaction effects between an organization’s double-materiality assessment and the taxonomy framework, and companies need to ensure consistency across these efforts. This is a theme which the European Financial Reporting Advisory Group also has addressed in implementation guidance. For example, a company may be engaged in an activity that qualifies as eligible under the taxonomy; however, the taxonomy disclosures may identify that that activity is not aligned (for example, not being done in a green way), which can mean that the activity in question may be creating negative environmental impacts.

In this context, companies will need to consider if their double-materiality assessment captures those negative impacts and, if there is a mismatch between taxonomy and double-materiality assessment outputs, it can be explained.

This overlap between the double-materiality assessment and taxonomy framework aims to ensure that companies provide consistent and comprehensive information on their sustainability practices. By being scoped in for both CSRD and taxonomy reporting, companies are required to disclose a broad range of ESG metrics under the ESRS standards and also identify the proportion of their business activities and investments that align with the EU’s established sustainability criteria.

Guidance for companies in the second reporting deadline wave

Businesses should expedite their adaptation and build capacity for regulatory compliance now and for future deadlines by performing key actions, which include:

Accelerate readiness to comply with CSRD — “Now is the time to accelerate [companies’] readiness efforts for CSRD and taxonomy” and “assess the size of the problem,” Tomlinson advises, adding that this involves conducting gap assessments, forming a roadmap for implementation, and prioritizing closing the most material gaps as a priority (such as those presented by taxonomy disclosures). Companies should also expand headcount, budget, and resources dedicated to ESG reporting and compliance, such as hiring ESG controllers to deal with the significant expansion in disclosures and related risks.

Harness ESRS for global compliance — The ESRS are the most extensive set of mandatory ESG standards, covering a maximalist set of disclosures across the ESG issue spectrum. As a result, preparing for ESRS compliance globally can help companies meet disclosure of the ESG reporting requirements in many other jurisdictions as well. Tomlinson notes ESRS has “the potential to become one standard to rule them all” in terms of global ESG reporting.

Be ready for new regulations — To prepare for the eventual Corporate Sustainability Due Diligence Directive (CS3D), companies should recognize that these regulations impose duties beyond just disclosure. Indeed, CS3D “actually is about dictating behavior rather than just disclosure” by requiring companies to perform certain types of sustainability due diligence and implement the results in order to avoid adverse human rights and environmental impacts coming from their own activities and those in their value chain, explains Tomlinson. The directive also contains a requirement for a Paris-aligned transition plan. Companies scoped into CSRD may also be scoped into CS3D, so they should first determine if that is the case, and if so, they should start planning for these extensive requirements now.

The journey towards comprehensive ESG reporting and compliance is a complex and evolving one, requiring companies to remain proactive. By embracing the challenges posed by the ESRS, the EU sustainability taxonomy, and ongoing legislative developments, organizations can drive positive environmental and social impact while strengthening their own market position.

You can find more on the challenges involved in here.

The DMA is part of a broader EU regulatory framework that includes the , which regulates online intermediaries and platforms such as marketplaces, social networks, content-sharing platforms, app stores, and online travel and accommodation platforms. Its main goal is to prevent illegal and harmful activities online as well as the spread of disinformation. It is also designed to ensure user safety, protects fundamental rights, and creates a fair and open online platform environment.

Since the central purpose of the DMA was to create fair business practice in the digital market, the identified gatekeepers are obliged to ensure there is transparency in their advertising metrics and pricing; provide access to data generated by businesses and with their services. These gatekeeping companies are forbidden from restricting users from uninstalling pre-installed software or apps, preventing other businesses from using other platforms or services, and forcing users to favor a gatekeeper’s services or products over a competitor.

On its surface, the intent of the DMA is to promote fair competition, including leveling the playing field in digital market, which is great; however, there may be some unintended consequences resulting from DMA or its larger framework DSA. Indeed, holds that when one thing changes, that change can impact other things to changes as well — and that may be at player here. As the gatekeepers will need to adapt to new standards and practices to be compliant for DMA, companies using these platforms then may also have to make changes to their systems to be able to continue working with the gatekeepers.

The cost of regulatory rules

In addition, the larger platforms may pass down any costs coming from new regulatory rules on to their customers and the smaller business lower in their service chain. From a tax perspective, there are three potential considerations for multinational firms based in the United States that are not one of the gatekeepers to keep in mind, including:

Impact of the Value Added Tax and the Goods & Services Tax — Non-gatekeeping multinational companies that nevertheless provide digital services or goods may find themselves required to comply with the Value Added Tax (VAT) and the Goods & Services Tax (GST) in multiple jurisdictions. The place of supply of goods rule is a that applies to businesses that sell in jurisdictions beyond their location and are required to make sure they have the correct locations of the consumers of their products or services so that they pay the appropriate taxes as required for each jurisdiction. In addition, filing accurately and in a timely manner is required.

Transfer pricing and intercompany transactions — Companies that begin to add the sales of goods and services resulting from opportunities afforded by DMA may be faced with a shift in the how the company is structured and how it prices intercompany transactions. This is one of the most controversial tax components for multinational organizations; and in the US, is required for intercompany transactions. It is a method that is based upon whether the transaction involves tangible or intangible goods or the provision of services, and how one part of the business may report on it to offset a tax liability. In addition, the transparency needed by the gatekeepers could require non-gatekeepers to adopt greater documentation since the tax authorities may require additional documentation on the transfer pricing transactions.

Effect on business models and pricing strategies — Because the central purpose of the DMA is to foster competition and prevent anti-competitive practices, this may present opportunities for business growth among non-gatekeeper companies. As a result, changes and adjustment to business models will bring their own tax implications. For example, companies may look at various service offerings, each having a different or specific tax obligation. And new business models might include offering bundled services, subscription models, and discounted or free trials — all of which can present very different VAT/GST calculations and additional tax implications.

Overall, for businesses offering digital goods and services, the enactment of the DMA created a window of possibilities and business opportunities that could make certain business goals a reality for many companies. With these opportunities, of course, there are additional tax implications that must be considered either simultaneously with or before moving into the digital goods and services sales market.

Further, the corporate tax departments of these multinational companies will need to stay abreast about how these potential changes will impact their organizations’ overall tax obligations. In the recent 2024 Indirect Tax Department Report, tax professionals indicated that international tax complexities were one of the top challenges to doing their work effectively. And more than 45% of survey respondents said they are looking to technology to help them with “accommodating e-commerce and digital products.”

You can download a copy of the Thomson Reuters Institute’s 2024 Indirect Tax Department Report, here.

According to the 2024 State of the UK Legal Market report, recently released by the Thomson Reuters Institute (TRI), GCs anticipated expenditures fluctuated wildly throughout 2023. According to the report, the net spend anticipation (NSA) score — a measure of what GCs expect to spend on legal services — swung from a quarterly high of 24 in Q2 2024 to a low of -1 by Q3, only to recover to a year-end score of 22.

The NSA score is calculated by asking GCs whether they expect their spend on outside counsel to increase, decrease, or stay the same over the coming 12 months. The percentage that anticipated a decrease is subtracted from the percentage that anticipate an increase, and the result is the NSA score. For example, in Q4 2023, 40% of UK-based GCs surveyed said they anticipated an increase in outside counsel spend, while 18% anticipated a decrease, resulting in an NSA score of 22 for the quarter.

The year-end mark is actually on the high side of recent years, nearly matching the high-water mark set in 2023 and comparing very well to other years. However, what is most remarkable about the NSA scores in 2023 was their incredible volatility.

NSA score on the upswing

After starting 2023 on a relatively even keel with the prior year, the NSA score doubled in Q2 2023 before dropping into negative territory in Q3, then rebounding massively to close the year. While quarterly fluctuations in NSA scores are certainly normal, such a wide swing is quite uncommon. In fact, it is relatively rare to see an NSA score dip into negative territory at all and when it does, the rebound effect is typically much less pronounced.

With that in mind, the massive jump in NSA is encouraging. The percentage of GCs anticipating an increase in their outside counsel spend in Q4 was among the highest tracked. Additionally, several key practice areas also reported double-digit positive NSA scores, including regulatory, insurance, banking & finance, labor & employment, and even M&A. These are all positive indications that the legal market in the UK may be on the upswing.

However, law firm leaders in the UK are also justifiably cautious about the potential impact of broader macroeconomic factors. Many GCs have reported in interviews with the TRI that much of the uptick in M&A work is being driven by investment from the US, tying the performance of that practice to the economy in the US, which continues to be in flux. The potential impact of the impending US elections and continued uncertainty about interest rates in the US could play a factor in transactional practice performance in the UK throughout the year.

Additionally, the UK is facing the potential of its own elections by the end of 2024, creating more potential uncertainty. At the same time, markets in the European Union continue to struggle, impacting the potential for continental work for UK law firms.

Interestingly however, volatile times can also be fruitful times for law firms. As businesses struggle to cope with changing market conditions, they often look to their lawyers for assistance in protecting the business’s interests and meeting the challenges that often accompany economic changes. For example, both 2016 and 2020 ended up being very strong years for law firm financial performance despite massive upheaval due to major elections in both years plus the introduction of Brexit in 2016 and the pandemic in 2020.

UK law firms that can position themselves to effectively meet their clients’ key challenges and priorities and bring value to the client may well capture an increased share of client spend. According to the TRI report, clients are placing top priority on being able to provide commercially viable, strategy-driven advice to their organization, and they’re looking for outside law firms that can do the same.

The opportunities for law firms to have in-depth conversations with their key clients about the evolving needs of the clients’ business should not be missed. Those firms that ask the best questions and do the most to deliver on clients’ commercial needs are the ones most likely to gain additional work and finish the year on top.

You can download a copy of the Thomson Reuters Institute’s , here.

However, according to the Thomson Reuters Instititute’s newly published , this net spend anticipation (NSA) fell sharply in the third quarter of 2023, before recovering to end the year on a much stronger note.

Driving this the Q4 recovery in demand included renewed spending on legal matters involving M&A and the financial sector; and as in previous years, London’s position as a global business centre means continued demand for cross-border legal advice. Alongside these opportunities, law firms serving the UK market must also be aware of clients’ priorities and expectations.

Despite the Q4 recovery, however, more volatility lies ahead.

Commerciality remains key, with emphasis on risk mitigation

The challenges for UK law firms remain largely unchanged: geo-political and economic instability, weak demand in certain sectors, increased competition, and cost pressures coming from clients.

According to the report, two-thirds of corporate clients said they have been under pressure to cut costs, with many bringing more legal work in-house or moving it to a lower-cost provider. Yet, the market remains sufficiently strong in the short term to hide the need for any radical change in the way law firms do business.

Yet, the report notes that opportunities for significant, and rather sudden, changes abound. Initiatives involving environmental, social & governance (ESG) matters, in all its variety, has appeared among the Top 5 strategic priorities for UK-based general counsel. And while it’s been important for their organisations as a whole in recent years, this is the first time we have seen it appear as a leading priority specifically for in-house legal teams. At the same time, the continued and rapid rise of artificial intelligence (AI) in the legal market presents even more emerging issues that law firms must navigate for themselves while simultaneously advising their clients on the potential advantages and pitfalls.

Artificial intelligence – clients are already ahead of law firms

The hot technology topic in 2023 was clearly AI and especially generative AI (GenAI). Indeed, the view toward AI is largely positive, with nearly two-thirds of UK corporate legal staff indicating that they feel positive about its impact. Interestingly, this was slightly more than law firms, which may risk being left behind by their clients, particularly when many (more than one-third of respondents) seem to think, incorrectly, that their clients would object to them using GenAI in their legal work.

And while GenAI may still be at a highly developmental stage, those law firms that do not take time to understand its potential impact — as a disruptive technology and a source of new business or greater productivity — will lose out not only to more forward-thinking legal competitors but to other professional advisers as well.

According to the report, two-thirds of corporate clients said they have been under pressure to cut costs, with many bringing more legal work in-house or moving it to a lower-cost provider.

In fact, C-Suite leaders report near universal intent to utilize GenAI in a wide variety of applications — and not just amongst the legal team — within their business over the next 18 months. However, they also saw many opportunities and challenges, around which they will certainly need advice and support.

The report also explores the potential for growth in legal spend by UK corporations, and what in-house legal teams are prioritising for 2024.

Among other key findings:

• • • The growing importance of commerciality and risk management
    • Satisfaction levels with the performance and service of outside counsel have been dipping slightly
    • Specialist knowledge is increasing as a key requirement for any law firm relationship

While UK law firms and their clients remain largely positive about the outlook for the market in the coming year, as the report finds, law firm leaders should be careful to avoid the complacency that can often accompany success.

You can download a full copy of the , here.