New entrants to the legal services market now account for 4.4% of total budgets - and corporate use is growing strongly, according to a snapshot of the sector published today. State of the Legal Market in the UK, published by legal information publisher Thomson Reuters, lists so-called alternative legal service providers (ALSPs) as one of the main external challenges to existing firms.
More than one third of corporations are now turning to ALSPs for legal tasks, the report finds, and the market is growing by 12.9% a year.
Law firms themselves, especially in the US, are increasing their use of ALSPs, the research found, outsourcing services such as e-discovery, research, and litigation & investigation support. 'While this is often driven by cost considerations, in some cases firms recognise there is specialised expertise available in the ALSP market that they do not have themselves.'
Another external challenge is from US-based firms operating in the UK, demand for which grew by 4.5% last year. A hiring spree by US firms continues, with the number of lawyers at the UK operations of US-based firms growing by 5.8% on average - and by more than 7% in tax, employment and litigation practices. Of the 100 ‘star lawyers’ switching firms last year, 30% went to US-based firms, the research found.
The report authors warn against complacency in matters such as the adoption of new technology, saying England and Wales firms may be tempted to regard US firms and ALSPs as niche players. ’After all, many of the world’s top law firms are UK-based, and there is little sign of the “Wimbledon” effect that the investment banking sector has seen, where the UK plays host to foreign champions but has few home-grown ones.’
However 'No sector is immune from disruption, and there a number of forces encouraging disruption in the legal profession — the ambitions of US firms, the growth of ALSPs, and the development of legal technology.’