Business: UK companies spend up to 1% of turnover on legal services - but less than US

UK companies are spending almost 1% of their turnover on the legal budget - and nearly half of general counsel expect litigation against their companies to rise next year, research revealed this week.


A survey of senior in-house lawyers in 50 UK companies by US law firm Fulbright & Jaworski showed that two-thirds of the businesses had faced legal action in the past year.


Employment cases were the greatest source of litigation cited in the survey (30%), followed by contracts (28%), product liability (26%), intellectual property (16%) and personal injury (14%).


UK companies spent an average of 0.8% of gross revenue on legal costs, the survey revealed. However, while one-tenth of US companies spent more than 5% of revenue on their legal budget, no UK respondents were spending this much.


UK general counsel took a stricter control of external legal costs, being far more likely than their US counterparts to demand budgets from law firms for litigation. Some 56% of UK senior legal counsel expected firms to provide a litigation budget, compared to only 35% in the US.


Energy companies were the most likely to require a budget, followed by manufacturing, and technology and communications companies.


Some 38% of UK in-house lawyers reported that diversity was an 'important factor' in the selection of their outside litigation counsel, while 28% said they had written diversity policies in place.


Almost three-quarters of UK companies assign more than half of their litigation to outside lawyers, the survey found. Just under one-third of UK respondents said they had at least one in-house litigator.


Fulbright & Jaworski senior litigation partner Graham Simkin said: 'We were surprised to see that almost half of respondents expected more litigation next year. The average budget of 0.8% is a significant number that will attract the attention of finance directors - especially when compared to, for example, research and development, where many companies are only spending 2%.


'In the UK, we have seen more in-house lawyers handling cases than ever before. That is either a change in direction by companies, or a sign of the times.'