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Identifying opportunities and embracing challenges for small UK law firms

The last eighteen months have been a tumultuous time for law firms in the United Kingdom (UK). In a profession that is typically office-based, firms had to adjust their standard operational practices and remote working became unavoidable. The regular business of running a law firm changed overnight.

Despite the considerable disruptions to standard law firm operations, many small UK law firms have made progress to overcome some obstacles. However, on the horizon, key issues remain that will need longer-term solutions for these firms to compete.

Five key challenges for small law firms in the market today are:

  1. Market and revenue expectations;
  2. Increase in client expectations;
  3. Practice area demands and business development;
  4. Technology; and,
  5. Attracting and retaining talent.

Data from the Thomson Reuters 2021 UK Small and Medium Law Firm Market (UKSMLF) report offers insights to these challenges.

Market and revenue expectations

According to the UKSMLF report, “the pandemic has caused challenges around ‘uncertainty’ and adapting to new ways of working — from dealing with challenges around IT infrastructure — to seeing fluctuation in workload and challenges with cash flow”. These issues are in addition to themes that flow from last year, such as managing expenses and the impact of regulatory change in the market. Though the competitive landscape remains tough, the biggest threat to law firms is online legal service providers (53%), according to the survey.

Increase in client expectations

Client demands on their law firms are on the rise as clients themselves become increasingly legally aware and business savvy. Over a third surveyed for the UKSMLF report indicate that client expectations are higher over the last year. Under increased pressure, too, from the pandemic — clients are seeking additional support from their external counsel. The respondents of the UKSMLF survey note that clients expect their lawyers to work out of hours, causing the line to be blurred between home and office — and faster response speed is also expected.

Change in practice area demands and business development

The pandemic has brought about some unexpected changes in practice area demand. One of the top areas experiencing a surge is employment law. This was primarily brought on by the UK Government furlough scheme with advice on employment contracts. Other areas that law firm leaders expect higher demands are ligation / dispute resolution; private client; commercial transactions; and, residential, according to the UKSMLF Report. Though, an increase in new practice area demands can off-set the decline in other areas. Agile law firms with access to up-to-date knowhow and research tools can take advantage of the surge in alternative practice areas and keep a competitive edge.


The increased competition from online legal service providers is seen as the number one commercial threat to small law firms, and medium law firms deem it in their top three. Conversely, only 18% of respondents for small law firms indicate an objective of ‘improving technology infrastructure and security’, with medium law firms slightly higher at 36% and noted as their third most important objective in the next 12 months. There is huge opportunity to promote firm growth with legal technology. By automating some of the more repetitive tasks, reducing research time — this leaves more time for client care and business development. Unsurprisingly, 75% of the survey respondents believe that technology will help them address many of the concerns law firms have in the current market climate.

Attracting and retaining talent

One consequence of the pandemic is what has been termed ‘The Great Resignation’ with a flood of people leaving their job. According to the 2021 State of the Legal Market UK report, 86% of the standout lawyers would like to change the way they work moving forward to embrace more flexible working practices. Most notable is that one-third of the respondent lawyers indicated they would leave their firm within two years if their firm doesn’t adopt more flexible working practices.

The trend seems to be moving away from primarily office-based and paper research tools. The use of legal technology assists with flexible working — and offers benefits from promoting greater efficiency, increased productivity, and improved client response time. Ultimately, the use of legal technology will help keep a firm attractive to the top candidates — and increase retention rates.


Despite the significant changes in the legal industry, there are opportunities for small law firms to grow and thrive. Traditional business models should be reviewed, updated, and changes implemented to stay competitive in a challenging landscape. Seizing the opportunity to expand practice areas will require investment in on demand and current legal information for your legal professionals. Moreover, staying competitive is paramount with the increase in demand for legal services that is predicted for 2021 and beyond.

Learn more about how your small law firm can gain a competitive advantage and operate more effectively.

Written by: Gilly Grant, Director, Thomson Reuters Legal Europe

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