Thomson Reuters report finds the majority of GCSs to reduce law firm use amid AI disruption and costs
More than half of UK general counsel are preparing to cut back on their use of law firms, driven by financial constraints and the rapid rise of generative AI. That’s the central finding of Thomson Reuters’ 2025 State of the UK Legal Market report, which signals a fundamental shift in how legal departments manage work.
The survey reveals that 54% of in-house legal teams plan to bring more work in-house over the next five years. Among law firms, only 35% expect the same. General counsel cite rising pressure to reduce costs, with 28% of in-house teams looking to cut legal spend—up from 22% last year.
“A growing number of general counsels are feeling pressure to bring external costs down,” said John Shatwell, head of legal professionals in Europe at Thomson Reuters. “For many of them, this will mean bringing more legal work in-house. They are also hoping that the use of GenAI will allow their external law firms to reduce their fees.”
Embed from Getty ImagesAI is proving to be a major disruptor, especially to the traditional billable hour. Currently, 62% of legal work is still billed hourly, while just 29% is billed on a value basis. But that’s expected to change—64% of general counsel and 58% of firms foresee a drop in hourly billing over the next five years.
Companies are also pushing for that change. More than a quarter of global businesses earning over $1 billion annually want to see value-based billing, with the figure rising to 32% among UK-based companies.
For in-house teams, the promise of GenAI lies in its ability to cut costs and improve efficiency. Around 41% of corporate counsel say they’re most excited about the time AI could free up, enabling them to focus on complex, strategic tasks rather than routine work.
Law firms, however, are not all moving at the same pace. About 30% worry they’re falling behind in GenAI adoption, a delay that could cause clients to seek faster-moving competitors. Nearly half (46%) believe alternative legal service providers using GenAI are already more appealing to clients.
“Lawyers and clients alike are keenly aware that new GenAI tools will shift costs and increase productivity,” Shatwell noted. “Clients continue to expect high-level strategic counsel from their law firms, but also want to see any productivity savings passed onto them – this will primarily happen through a shift to value-based billing.”
This growing divide between firms that embrace AI and those that lag behind is reshaping the market. According to The Global Legal Post, which recently partnered with LexisNexis for a separate study, legal teams across Europe are increasingly aware of how GenAI can deliver higher quality advice at lower cost—placing additional strain on traditional firms.
Raúl Rubio, a partner specialising in IP and technology at Spanish law firm Pérez-Llorca, described this shift: “The pricing model will become more and more value-based – this means that in some cases, we will be able to provide more value than the hours that we invest in a specific task.”
The takeaway is clear: while GenAI may not replace lawyers, it will certainly replace the way they work. And those who fail to adapt risk losing their clients—not to machines, but to lawyers who know how to use them.
