The fundamental structure of billing for legal services is being challenged by artificial intelligence (AI) suggests a new report from legal software supplier Clio.
Clio’s 2027 UK & Ireland Legal Insights Report suggests traditional hourly billing is being undermined by the rise of AI which is reducing the amount of time tasks take: “Tasks that legal practice has long organised around human eff ort can now take less professional time. Much of the firm’s operating model was built around that human eff ort. Work moves from one person to the next. Junior lawyers develop by producing first passes. Hours make eff ort visible. Under hourly billing, revenue rises with the professional time a matter consumes. If parts of the work take less of that time, the structures built around it no longer hold the way they did.”
The report goes on to suggest “professional time can now be redirected towards judgement, strategy, client relationships, and complex decisions” with pricing based on the value of the output, rather the time invested in input.
“AI is making us question the traditional billable hour,” said Marcin Durlak, Managing Partner and Joint Founder of Manchester-based IMD Solicitor. “If technology enables a lawyer to deliver the same or better result in half the time, should the value of that service automatically be halved? That’s one of the reasons we’re moving towards value-based pricing, where fees are agreed with clients based on the service, outcomes and value delivered, rather than simply the hours recorded.”
The report found 92% of more than 500 legal professionals surveyed now report using AI at their firm, up from 89% last year and 84% say it has increased their capacity to handle a higher volume of work, up from 78%.
At these firms, the most common uses are drafting legal documents (44%), reviewing or summarising documents (43%), and conducting legal research (40%).
Amongst the 500+ consumers surveyed 83% of clients said they preferred fixed fees, compared with 37% who are comfortable with hourly billing. The report also suggests firms are moving more slowly, with 60% of legal professionals saying their firm uses fixed or flat fees alongside other billing models.
Firms with wide or universal AI adoption are more than twice as likely to report significant revenue benefits as those with minimal or partial adoption (53% vs. 20%). At AI-adopting firms, 72% say AI has had a positive effect on revenue, up from 67% last year.
Despite widespread concern about AI-related job losses, the report found only 10% of legal professionals reported a reduced need for junior positions at their firm. Instead, 14% report a shift towards more senior or specialised roles, 14% say their firm has recruited for new positions focused on AI or legal technology, and 29% say AI has let their firm manage increased workloads without increasing headcount.
This suggests, adds the report, a “clear link between depth of adoption and wellbeing.” At firms reporting universal AI adoption, 95% say AI has reduced their stress, compared with 66% at firms with minimal adoption. Nearly three quarters (72%) of legal professionals using AI say it has positively contributed to their desire to stay at their current firm for the next two years, rising to 90% at universal-adoption firms and falling to 61% at minimal-adoption firms.
For Sarah Murphy, General Manager, International at Clio the question for UK and Irish firms has “moved beyond whether to adopt AI, but how to integrate it. This year’s data shows what good integration looks like in practice: less stress, teams who want to stay, and firms that can deliver more for their clients. For solo, small, and mid-sized firms especially, it’s clear that with wide or universal AI adoption there are true opportunities for growth.”
