What’s in store for SME law firms in 2025?

As we clear away the Christmas party poppers and start to concentrate on the year ahead, I am sure most SME legal business leaders will have a mixture of excitement and dread.

I feel 2024 brought with it technological advances not just in the legal sector but also with service providers supporting the sector. This is likely to have been one of the catalysts that captured the appetite of SME law firms, which have previously been slow at adopting technology. This shift to a ‘digital first’ in mindset over the course of 2024 is likely to create more affordable products from service providers that are better tailored to the SME legal market. This is exciting in itself!

In 2024 we also saw AI have a presence at most conferences, which reinforced the view of many industry leaders that AI isn’t going to go away anytime soon.

For those of you, like me, who have been working in the legal sector for three or four decades, you will recall a handful of key milestones that have enabled a proportion of firms to create a very wide competitive advantage; typewriters to computers, manual accounts to computerised, adoption of websites to name but a few. Firms that fell behind simply closed as the gap became too big.

I believe AI will be one of those milestones. Those firms that were early adopters of AI are likely to place themselves in pole position for widening the gap between their competitors.

What is increasingly exciting is the wide variety of opportunities that AI presents from assisting with source of wealth/funds checks, filtering key legal information from important documents, or creating social media posts.  I am excited to see which firms and suppliers do this well in 2025.

Capitalising on opportunities tends to cost money. SME firms don’t often attract external investment in the same way larger firms do, so managing working capital and partner succession is often a juggling act. Partners who are close to retirement may not wish to tie their money up in medium to long term technology investments.

SME leaders are also grappling with economic, legislative and regulatory challenges that are likely to emerge in 2025.

I spent some of Christmas flexing my budget to accommodate both the increase in employer national insurance and the national minimum wage. Suppliers have also been putting their prices up to absorb these increases. The combined result of this is one where SME firms are going to have to significantly increase their prices. However, this is in a market where we are seeing an increase in price sensitive clients, many of whom have been coming off their fixed rate mortgages.

There is also a real feeling that the Solicitors Regulation Authority (SRA) might have something to prove during 2025 in the wake of The Legal Services Board decision to review their dealing of Axiom Ince.

Finally, a new government often brings with it new legislation that has been promised in their manifesto, so we also have to be prepared for this.

And here was me hoping 2025 would be a quiet one!