Government-commissioned report says open regulatory model will help the legal sector evolve
A new report for the Ministry of Justice says the UK legal sector may require further regulatory reform in order to take full advantage of the rapid progress being made in lawtech. It suggests that the legal sector of the future may look very different from the one that exists today. The report titled The benefits of an open and competitive legal economy was produced by the consultancy Hook Tangaza and highlights how innovation has shaped the growth of the sector over the past four decades.
The report says that the sector has benefited greatly from a more open and competitive legal economy that has supported inward investment and international trade. It also notes that the expansion of the legal market since the mid-1980s was linked to the liberalisation of financial services and telecommunications. These developments created favourable conditions for the growth of business legal services.
Looking ahead, the report says the world is entering a new technological cycle characterised by products and processes that rely heavily on artificial intelligence and advanced forms of intellectual property. At the same time, the global framework that supports international business is becoming less predictable. In this environment, the demand for legal services as a means of managing complexity and risk is expected to increase. However, the type of legal services delivered and the way they are traded will need to adapt.
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According to the report, the UK legal sector was valued at 45 billion pounds in 2022. This figure does not include the work of in-house teams or alternative legal service providers. The sector has grown by 200 percent in real terms since the late 1990s outperforming the wider economy, which grew by 157 percent during the same period. The report credits the introduction of the alternative business structure model as one reason for this growth. It says the model increased competition and made the use of technology on a large scale more achievable.
Hook Tangaza says further steps are required to help the sector respond to unmet legal needs among consumers and small businesses while continuing to develop advanced services for larger organisations. It says policymakers may need to reassess the boundaries of the regulated sector and consider whether the current list of reserved activities is suitable for a digital world. The report also calls for a new framework that can help lawtech companies operate across borders.
The report concludes that these changes could help unlock the potential of the consumer lawtech market and improve access to justice. It also says that the legal sector of the future may be very different from the one that exists today.
In a foreword to the report, Sarah Sackma, who is the Minister of State for the Courts and Legal Service, said the document shows how openness has supported the long-term success of UK legal services. She said the government remains committed to promoting the UK’s legal services both nationally and internationally and to supporting the sector as it continues to grow.