A new report shows how UK legal buyers are adjusting their expectations for how their law firms’ legal work is delivered, including through AI integration
Key insights:
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UK law firms face a more selective growth market in 2026 — Client demand remains steady, but external legal spend expectations have cooled, with growth concentrated in areas such as Regulatory, Labor & Employment, and international work.
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Legal expertise alone is no longer enough — UK legal buyers increasingly favor law firms that combine technical excellence with commercial judgment, business understanding, and practical guidance aligned to client priorities.
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AI adoption is becoming a client expectation — Corporate legal teams are moving faster than their outside law firms on GenAI, and many UK legal buyers now expect outside counsel to use AI to improve efficiency, workflows, and the quality of legal work.
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The legal market in the United Kingdom today has shifted into a new normal. While law firms saw an explosion of demand and spending immediately following the pandemic, increasing client caution has resulted in a shift in priorities. Today’s law firms cannot simply rely on their old ways of providing legal service to succeed, as UK clients expect firms to combine expertise, commercial judgment, international reach, and visible AI-enabled improvements in how legal work is delivered.
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2026 State of the UK Legal Market
A new report from the Thomson Reuters Institute, “2026 State of the UK Legal Market,” reveals how the UK legal market is shifting, as more judicious clients are beginning to force law firms to reassess their strategy. Overall anticipated net spend from legal clients has seen declining growth rates in recent years, and while some practices like Regulatory and Labor & Employment continue to see strong demand growth, other practice areas such as Insurance, IP, and Disputes face potential contraction.
This shift is also guided by emerging buyer preferences. The report reveals an increasing commerciality to the UK legal market, one in which clients increasingly favor advisors that combine legal excellence with commercial judgement, and those that are leveraging AI to bolster not only efficiency but improve the overall legal work product.
Taken as a whole, the report paints a picture of clients that now are moving faster than their outside legal advisors, strengthening their internal capabilities, and setting clearer (and higher) expectations. This means that UK law firms cannot rest on their laurels, as clients increasingly push their outside firms to keep up with new business challenges.
The market is cautious, but opportunity remains
The report reveals that UK legal buyers are more cautious about external legal spend than they have been at any point in the last five years. That may mean law firms can no longer rely on the broad-based demand that defined the post-pandemic period and instead need to be more precise about where opportunity exists — and where it doesn’t.
The report tracks buyer sentiment through net spend anticipation (NSA), which measures the share of buyers expecting to increase external legal spend over the next 12 months minus those expecting to decrease it. Since its 2021 peak, UK NSA has fallen steadily to +5 percentage points in 2025, returning the market to the more stable, single-digit baseline that was seen before the pandemic.
For those law firms looking to capture increased business, the report makes clear that legal expertise is now the price of entry, not the point of differentiation. The firms that stand out will be those that know how to apply their expertise in ways that reflect the client’s business realities.
Indeed, that is becoming even more important as corporate legal departments face growing pressure to demonstrate their own value to the wider organization, and they’re increasingly pointing to improvements in their own quality and effectiveness even before mentioning cost savings, efficiency, or time savings. Not surprisingly, more than one-third of UK legal buyers now cite business savviness as a reason they favor a particular law firm.
To help demonstrate their internal value, clients are pushing their outside law firms to leverage advanced technology to improve the overall effectiveness of legal work. Of course, this has resulted in a clear gap, the report notes, between how corporate legal teams are moving and how law firms are responding. For instance, the report shows that more than half of UK corporate legal respondents say their organizations are already using GenAI tools across the business, compared with just about one-third law firm respondents who said this.
That difference in outlook matters because clients increasingly believe AI will become a larger part of how legal work is delivered, and they’re not content to simply wait and see whether their outside counsel will fully adopt the technology. Indeed, corporate legal departments are expecting their outside law firms to keep pace with how legal work is changing, and they will reward those firms that do.
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