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The majority of UK law firms (74%) say their IT spending has increased since 2021, according to new research from HSBC UK and Briefing.
Part of the reason for this increase is the need to maintain a competitive advantage over peers and rivals. More than three quarters (77%) report that peers having more tech-driven business models present the most potential for disruption at their firm.
The Law Firm Strategy and Investment Survey 2023/24 finds increased urgency over investment in client-facing IT, such as improving tools which aid productive collaboration on matters or sharing information, with 45% prioritising investment here in 2023 (up from 20% in 2022 – an increase of more than 100%).
The report shows the top 3 priority areas for investment in new technology over the next two to three years are: implementing systems to make legal work quicker or more efficient (77%), bringing in tools to improve collaboration with clients and among teams (48%), and identifying spend on risk management including cybersecurity defences (47%).
Cybersecurity is an important challenge
Second only to navigating salary competition and attrition, half (50%) of UK law firms now identify cybersecurity as the most concerning organisational challenge, up from 41% in 2022 – as the legal sector comes under growing threat from cybercriminals targeting highly sensitive client information and significant funds potentially passing through their systems.
Despite this, the average approximate percentage of annual revenue law firms expect to spend on technology through 2023-2024 is just 5.7%.
Commenting on the findings, Victoria Ritchie, Head of professional and business services HSBC UK Commercial Banking, said, “Our legal customers are facing growing pressure to develop tech-enabled business models and stay one step ahead of the threats posed by cybercriminals. So it’s very positive to report UK law firms are across this and actively taking steps to further strengthen their security and continue to enhance their client offering.”
UK law firms have been navigating an uncertain global macroeconomic landscape over the last 12 months. However, it has not negatively plans for international expansion. of those with an existing international presence (just over half of firms), 54% report having more international growth in their sights. This is consistent with responses in 2021 and 2022. Perhaps more significantly, just 7% report their international growth plans are on pause or under review over the next two years – down from 11% in 2022.
After the UK (74%), the top-priority regions for growth among law firms are the rest of Europe (35%), followed by the far east and south-east Asia (31%) and North America (26%).
Victoria Ritchie said, “Despite rising interest rates and stubbornly high inflation, law firms have demonstrated remarkable resilience and many are sticking to their international growth strategies. As the bank of choice for 40 of the top 50 UK law firms, HSBC UK is well placed to help simplify operations for clients expanding into new markets so they can focus on taking full advantage of these opportunities. We’re confident firms are well positioned to successfully adapt to whatever challenges lie ahead and perform successfully over the coming years.”