What Happened
CNBC reported that almost 90 % of legal professionals in the U.K. and Ireland now use artificial intelligence, according to Clio’s U.K. & Ireland Legal Insights Report 2026. That report found that among firms using AI, almost 80 % said they can handle more work without increasing resources, while over 70 % said it cut costs by absorbing administrative work once done by support staff. A&O Shearman has worked with legal AI company Harvey to develop artificial intelligence agents for tasks including reviewing loan agreements and analyzing regulatory filings, which it says can complete in minutes work that previously took several hours. Slaughter and May, meanwhile, has rolled out Harvey across all practice areas this year, including for regulatory research and document analysis. The billable hour is central to the business model of many law firms, but when AI significantly reduces the time lawyers spend sifting through and drafting documents, the economics are no longer so straightforward. Nick Rowles-Davies, founder and CEO of legal finance fund Lexolent, told CNBC, “You can’t charge 16 hours for something that takes 16 seconds.” About one in five firms that have widely adopted AI report difficulty meeting billable-hour targets, according to Clio’s report. Globally, senior legal leaders expect the share of work charged by the hour to fall from 72 % to 44 % over the next two to three years, according to a Deloitte survey. Routine work is the most exposed, Rowles-Davies said. “If you’ve got standard documents and you’re just putting in detail, then clearly that’s an automatic process.” But complex legal work still requires human judgment, he added, particularly when interpreting AI output and determining the right strategy.
What This Means For You
If you’re a lawyer, partner, or practice manager, the shift away from a billable-hour model toward value-based or outcome-based billing is one worth planning for rather than waiting out. First, audit your current workflow: identify repetitive tasks that Harvey or similar AI tools can handle. Weighing the reported efficiency gains — Clio found that over 70 % of AI-using firms said the technology cut costs by absorbing administrative work — against the cost of adoption can help justify an investment. Second, revisit your billing structure. As clients push for transparency, flat-fee or milestone-based arrangements may make more sense for routine matters. Third, invest in training. Because complex matters still turn on human judgment, lawyers will need to be able to critique and refine AI output. Fourth, rethink talent acquisition. Firms that adopt AI will need lawyers who can interpret AI insights, bridge technology and strategy, and manage hybrid teams. Finally, monitor regulatory developments. As AI becomes integral to legal work, data privacy and ethical guidance are likely to evolve; staying ahead of those changes will protect your firm’s reputation.
Why It Matters
This trend points to a fundamental restructuring of legal economics. The billable hour, long the backbone of law firm revenue, is under pressure as AI reduces the time needed for drafting and research. If the Deloitte forecast holds, firms that lean heavily on hourly billing could see profit margins erode, potentially prompting consolidation or the growth of boutique AI-enabled legal service providers. Lower costs could also expand access to legal services, including for smaller businesses that previously could not afford hourly rates. Conversely, lawyers who resist adopting these tools may find themselves at a competitive disadvantage. Both effects illustrate how AI reshapes traditional business models and forces stakeholders to adapt quickly.
Key Takeaway
- Almost 90 % of U.K. and Irish legal professionals now use AI, and most AI-using firms report handling more work without more resources.
- The share of work billed by the hour is projected by senior legal leaders to fall from 72 % to 44 % over the next two to three years.
- Tasks that once took hours can now be completed in minutes, and about one in five firms that have widely adopted AI report difficulty meeting billable-hour targets.
- Firms should reconsider billing, talent, and compliance as AI becomes embedded in legal work.
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