AI adoption among law firms has gone from half to almost all in a single year, according to the NatWest Legal Benchmarking Report published on 22 September. Only 5 per cent of the 112 firms analysed said they were not using AI, against 50 per cent in the previous edition. The report, written by Andrew Allen of the accountants PKF Francis Clark, also finds that most of those firms have taken no step to recover what they spent, and only a minority have begun to review their fees.
The firms in the sample range from £1m to £250m in turnover, with a median of £23m, so the typical respondent is larger than a high street practice of ten people. The direction still holds for a smaller firm, because a licence fee and the hours spent learning a new tool weigh more heavily on a thinner margin.
Adoption has run ahead of profit
The profit figures sit awkwardly beside the adoption figures. Median profit per equity partner rose by 2 per cent this year, after a rise of 23 per cent in the previous report. Confidence has held up, with 84 per cent of firms expecting income to rise in 2027 and 40 per cent willing to consider outside investment.
Last year's report, when half the sample used AI, found the tools applied mainly to administrative processes and matter management. That is where the time goes first, and it is also the work a client rarely sees on a bill. Among the minority of firms that have looked at recouping the cost, reviewing their pricing and the services they offer was the main response.
Why the hourly rate hides the gain
A firm that bills by the hour and uses AI to produce a first draft of a letter in ten minutes instead of forty has, on the timesheet, earned less. The client gains, the firm carries the licence cost, and nothing in the fee reflects the investment. That arithmetic explains why adoption can run so far ahead of profit.
Keeping the saving from the client is no answer. A bill for forty minutes when the work took ten would not survive an assessment of costs, and it would sit badly with the client the first time they asked how long the draft took. The return has to come through the way you price the work.
What to change before your next budget
Start with the matter types where AI already carries the most load, which for most firms means correspondence, first drafts, summaries and bundles. Time a handful of matters from instruction to completion, some with the tools and some without, and you will see where the hours went. Where the saving holds steady, move that work to a fixed fee for a defined scope, set at the value of the outcome to the client, and publish it alongside the prices the SRA transparency rules already require for several areas of practice.
Then give the tools a line in your management accounts. Charge each licence against the teams and matter types that use it, so the figures show what a tool earns instead of hiding it in general overheads, and cancel anything nobody has opened in a quarter. Last, decide what happens to the hours your fee earners get back. Put them into more matters, into supervision or into winning work, because time nobody plans for is time the firm never bills.
NatWest has not put the 2026 report on an open page. Legal Futures carries the fullest account of its findings on AI, free to read without registration.
If you want to find out what your AI spend is earning and how your pricing should change to match it, start with a conversation.
