Source: Axiom
The Recovery Trajectory
After weathering severe budget cuts in 2023, UK legal departments are entering a period of strategic growth, with an overwhelming 79% of General Counsel (GCs) anticipating budget increases for 2025. This shift marks a decisive break from traditional approaches as legal teams prepare for an AI-driven future.
Following widespread cuts averaging 12% in 2023, 38% of departments secured modest budget increases averaging 5% in 2024, while only 3% faced further cuts. This stabilization sets the stage for more ambitious plans in 2025, particularly in technology investment.
Technology Takes Center Stage
The technology imperative is clear, with 99% of GCs acknowledging the need to restructure their budgeting to account for AI and emerging risks. This recognition has sparked a significant shift in spending priorities, with technology (69%), in-house staff salaries (51%), and legal operations (39%) emerging as the top areas for increased investment. AI tools, particularly virtual legal assistants, predictive analytics, and automated contract review, stand at the forefront of this technological transformation.
Breaking Free from Traditional Models
Perhaps most notably, legal departments are breaking free from traditional precedent-based budgeting models. The research reveals that 78% of GCs are either considering or actively planning to change their budgeting approach. This shift is driven by multiple factors, including regulatory demands, organizational changes, and an increasing need for operational agility. The move toward rolling or continuous budgeting models reflects a broader transformation in how legal services are delivered and managed.
The Power of Dynamic Forecasting
The power of dynamic forecasting emerges as a crucial success factor. GCs who forecast at least quarterly showed remarkable success in securing budget increases, with 89% reporting growth in 2024. This regular forecasting enables better resource management, enhanced priority setting, and improved expense anticipation. The data suggests that frequent forecasting isn’t merely a planning tool but a strategic advantage in securing and managing resources.
Bridging the Finance-Legal Divide
Challenges persist, particularly in the relationship between legal and finance departments. Only 26% of GCs report having a good relationship with their CFO, while 79% have experienced tension, primarily over balancing cost-cutting with risk management. This divide highlights the need for legal departments to develop stronger metrics-driven approaches to demonstrate their value and align their objectives with broader organizational goals.
The Path Forward
Looking ahead to 2025, successful legal departments will likely be those that can effectively balance technology investments with talent development while maintaining cost control. The emphasis on AI-driven tools, coupled with more dynamic budgeting approaches, suggests a future where legal operations are more agile and data-driven than ever before.
The shift from traditional budgeting models to dynamic approaches reflects a broader transformation in how legal services are delivered and managed. Success in this new environment will require not just technological adoption but a fundamental rethinking of how legal departments operate, budget, and demonstrate value to their organisations. As one GC noted in the survey, the focus is increasingly on “building more agile, technology-enabled operations that can respond quickly to changing business needs while maintaining effective risk management.”
Conclusion
The data points to a clear conclusion: 2025 will be a pivotal year for UK legal departments as they navigate the intersection of technological innovation, budgetary pressures, and evolving operational demands. Those who can successfully adapt their budgeting strategies while embracing new technologies will be best positioned to thrive in this changing landscape.
Read more: Axiom
