Scottish legal sector at tipping point as technology concerns take hold

The global legal industry is at a tipping point as firms struggle to keep up with advancements in technology that continue to disrupt the market, according to a new report published today by accountancy and business advisory firm BDO.

According to the Law Firm Leaders Survey, which polled the managing partners and senior partners of 63 Scottish, UK and international law firms, all Scottish leaders said the pace of change in the legal industry, driven mostly by the impact of technology, was increasing.

The report says a new period of disruptive market challenges will dominate the sector during the next 5 years.

The findings of BDO’s Law Firm Leaders Survey shows that technology is expected to have the greatest impact on law firms in the short term, with approximately 7 out of 10 law firm leaders seeing it as a major factor to their firm’s success over the next five years. Unsurprisingly, technology is considered a strategic priority for over 90 per cent of Scottish law firm leaders surveyed.

One Scottish managing partner said: “There is real change occurring in the world in terms of technology, but many law firms are not in the position to invest in it.”

After technology, Scottish firm leaders said legal market consolidation and competition, Brexit, changing client demands and generational change are the biggest threats.

UK firms considered US law firms, new market entrants and the Big Four accounting firms as significant competitors to watch.

Meanwhile, they expect businesses to take more work in–house, where automation is likely to reduce the need for external lawyers in routine and high volume areas.

Almost half (44 per cent) of law firm leaders said cultural change will be a big challenge in keeping up with new technology. Of those, the majority (59 per cent) said it was a firm-wide issue, while 41 per cent said partnership resistance could be the biggest problem.

When asked about their Brexit concerns, 32 per cent of global firms and 24 per cent of UK firms said an exit from the EU would have the greatest impact on the legal industry over the next five years. While some believe lawyers will benefit from a temporary uptick in regulatory work as regimes and rules change, more are pessimistic about potential long-term impacts on workflows.

Martin Gill, head of BDO LLP in Scotland, said:“In this new world where technology and changing client demands are causing firms to reconsider how legal services are delivered, is it feasible that law firms can continue to provide legal services in the same way they have done for decades?

“Law firm leaders must accept that if they want to maintain competitive advantage they will need to be much bolder in their approach to overcome with these disruptive market changes.”