Reflecting on 2023 helps us to highlight the trends that will follow us into the new year and those we can leave behind. The legal industry is ever moving and demands you to adapt if you want to guarantee success. The industry is heavily impacted by the social and political circumstances of the time as it serves society and the demands of clients. The legal landscape for 2024 brings growth to many sectors along with certain concerns seeping in too.
The way lawyers will have to work could be drastically changed with the billable hour being pushed out by client demands. The presence and growth of AI in law will follow us into 2024 with an even bigger emphasis on utilising these new tools. Law firms are losing revenue and 2024 will be detrimental to trying to make a switch for the better. The need to prioritise their own ESG concerns and law firms will be increasingly taking on more climate cases and will be under pressure from climate activists observing their goals and decisions too. Law firms will have to be ready for all of these and more in 2024.
Just a few of the trends that we predict for 2024…
- The end of the billable hour.
With increasing pressure from clients for efficiency and corporations trying to manage costs the billable hours could become outdated. The Law Society Gazette reported that in 2023 nearly half of all external legal spending took place through alternative fee arrangements including flat or fixed rate rather than billable hours. This shift is likely to continue in 2024 as these appeal to clients managing their legal costs due to the cost-of-living crisis affecting businesses. PWC states that billable hours for full equity partners in the UK’s largest firms fell by 8.3% throughout 2023. This turn away from the billable hour leaves lawyers to introduce fixed rates for a project which clients believe will improve productivity. Rather than focusing on how much time lawyers spend on a project, they will focus on getting it done without delay as they will no longer be receiving more money the longer the project goes on.
BCL legal report that 63% of firms stated a difficulty in determining a profitable pricing system which prevents them from implementing AFA’s. However, in 2024 we could see a decrease in the billable hour as law firms have begun to utilise data analytics to determine their pricings and clients are appeased.
- The continued increase of AI and Legal Tech.
The rise of AI is hitting most industries and the question of whether AI can replace lawyers has been inducing fear for quite some time. The fear is fading as lawyers learn AI cannot emulate them perfectly and now the industry is getting on board and introducing new tech into the business as a support aid.
2023 has seen innovative ways to use AI including Allen and Overy launching ‘Harvey’ an AI-based chatbot to help draft contracts. Harvey has the ability to understand 43 different languages and generate and access legal content with unmatched efficiency, quality and intelligence. The technology was brought into the firm as a way to support more than 3,500 of Allen and Overy’s lawyers.
It is clear there will be an increase in the use of AI and tech as an increasing number of firms see its potential and Garter expects legal departments to triple their spend on legal tech by 2025.
- Decline in revenue.
In 2023 the legal sector saw a 6% growth, however, in 2024 it is predicted there will only be a +2% growth showing a decline reported by LexisNexis. Due to the economic situation, there has been a fall in demand in the legal sector as businesses strive to keep costs down and keep it internal.
Citigroup found that in the first nine months of 2023, revenues grew 4.8% but client demand declined by 0.7%. The time it took for clients to pay their bills lengthened by 5% whilst lawyer billing rates increased by 8.2%.
If law firms wish to increase their revenue for 2024 then using AFA’s or AI support could be the way forward.
- Climate litigation and ESG concerns on the rise.
With the concerns for the environment growing each year, 2024 will be no different and the legal sector is continually under observation of their actions towards ESG. Law firms will have to be honest about their own ESG goals as well as their client’s ESG commitments to avoid being in the spotlight.
A report from Columbia University states that the number of climate cases has more than doubled in the last five years, and litigation is expected to continually increase. The legal industry will see a continual rise in cases linked to ESG and climate change to create a positive impact. Climate litigation is being seen as an integral way to secure action and justice.
Cases not only include basic climate rights but also; Corporate liability and responsibility, keeping fossil fuels and carbon sinks in the ground, domestic enforcement of international climate change commitments and climate disclosures and greenwashing. Law firms will have to work to appease society’s climate anxiety and to preserve their status.