The proportion of U.K. in-house counsel expecting to spend more on external legal work in 2022 has risen sharply, as businesses continue to adapt to a post-pandemic and post-Brexit market.
The percentage of legal buyers planning to increase overall legal spend subtracted by those planning to decrease spend hit 23%, up from 1.1% the previous year, according to a Thomson Reuters survey of 265 senior corporate counsel. It is by far the highest net figure in the last five years.
Almost half (42%) of respondents believe that spend will increase on regulatory work, while corporate (31%) and M&A work (28%) spend is also expected to increase.
The most common issue cited by counsel was the impact of COVID-19, followed by complex/changing regulation. Germany, the U.S. and France were the overseas jurisdictions where U.K. buyers had the greatest need, with about two-thirds mentioning each region.
Respondents to the survey included chief legal officers, assistant GCs and legal operations heads, with 25% of respondents coming from financial institutions and 15% from technology and media companies.
The report noted: “The new reality may be contributing to an attitude among U.K. legal buyers and corporate clients that while the worst may be over, there will remain an acute need for quality legal work as the world’s economies continues to right themselves.”
Commenting on the numbers, Toby McCrindle, head of legal and compliance at financial services software company Divido, agreed that spend will go up as the company enters new markets and needs regulatory advice, but it will be a “hard balancing act” of where else to allocate legal spend.
The prevailing view that persists, he said, is that in-house teams are still facing budget cuts. Earlier in April, several in-house lawyers slammed increased fee quotes from external advisers, with some being quoted more than double what rates were around a year ago.
Additionally, respondents said that e-signatures (82%) and legal research (71%) were among their two top-used technology solutions.
The report also found that U.K. clients are now looking to a “fleet of attributes” when selecting law firms rather than just favouring historic relationships. Factors include a deep understanding of clients’ businesses.
McCrindle noted that this has been the case for some time, with GCs often putting firms through “interesting tests and questions” during panel reviews, with firms also being grilled on diversity and CSR credentials.
In 2021, FTSE 250 airline easyJet undertook an unusual panel review, opting to ditch formal presentations in favour of voicemail challenges and a Himalayas simulation exercise, while several GCs including Novartis and Natwest have pushed for greater diversity among their external legal advisers.