The headline finding from PwC’s 34th Annual Law Firm Survey is one of reassuring, if uneven, resilience. Against a backdrop of macroeconomic uncertainty, the UK legal market remains robust, with 95% of the Top 100 firms reporting growth in UK fee income.

However, to stop reading there would be to miss the report’s far more urgent finding: this resilience is being tested. Growth rates are slowing, margins in the mid-market are contracting, and underpinning all this is a powerful, structural shift: “increasing pressure from pricing constraints”.

This pressure, as the PwC report highlights, is not a cyclical blip. It is a fundamental recalibration driven by Generative AI. For senior leadership, the survey’s findings on AI are not something to note for the future but underline a present-day strategic challenge. They echo the trends we identified in our own September AI in Law Firms update: AI is no longer a peripheral tool but a “central force” reshaping the client-firm relationship and, critically, a firm’s business model.

The pressure is on: the tech-enabled client

The strategic challenge begins, as it always should, with the client. Our September update highlighted that AI is now a mainstream business tool, which has “fundamentally alter[ed] client expectations. Clients are using AI for their own efficiency and are “increasingly looking to their law firms to provide the same value”.

PwC’s survey shows this pressure has arrived. Firms across the board report a “growing apprehension about price erosion as clients increasingly expect efficiency gains to translate into reduced costs and exert downward pressure on fees”.

This client-side pressure is twofold. First, there is the direct threat of work being reclaimed. Our report noted that in-house legal teams are accelerating their own tech adoption, with GC trust in AI doubling in the last year alone. PwC’s survey now finds that half of the Top 11-25 firms are alert to the risk that clients may “embrace comparable technologies, thereby reclaiming work that might otherwise have been outsourced”.

The AI efficiency paradox hits home

The second, and more profound, pressure is the one GenAI exerts on a law firm’s core pricing structure. In our update, we called this the “AI efficiency paradox”: when a task that once took a junior lawyer hours can be done in minutes by an AI, how can you justify billing for time?

PwC’s data makes this a quantifiable problem, reporting that across the Top 100 firms, the proportion of chargeable hours that firms believe could be saved/automated through the use of AI tools has risen from11% last year, to 16% this year.

This creates a dangerous disconnect. Our research found that 80% of corporate legal executives expect their bills to be reduced due to AI, and 71% would prefer a flat fee. Yet, many firms are on a collision course with this expectation. A separate study we cited found that 53% of firms expect their charge-out rates to remain the same despite using AI, with a further 20% expecting an increase.

This gap between client expectation and firm intention is, as we noted, a “significant strategic vulnerability”.

From tactical tools to strategic fluency

The PwC report shows that “virtually every Top 100 firm is now engaging with AI in some capacity”, but this engagement is “fragmented”.

The data reveals a stark divide between tactical adoption and strategic monetisation. While over half of the Top 50 firms are realising productivity or financial benefits, none of the Top 51-100 firms reported that they have monetised their AI benefits. This strongly suggests that firms are buying tools without a coherent strategy to integrate them into their pricing, workflows, and value proposition.

This is where leadership must step in. The “urgent need” PwC identifies is “to re-examine and innovate… pricing strategies”, predicting a “pronounced shift” towards fixed-fee arrangements.

This is not an IT problem to be solved by the CIO. It is a fundamental business model challenge that requires a firm-wide capability: AI fluency – the ability to confidently understand, critically question, and responsibly apply AI tools without needing to be a technical expert.

PwC’s report issues a stark warning: without equipping partners with the skills to “negotiate fees effectively in this transformed landscape, “firms risk “undermin[ing] both… performance and profitability”. Partners and senior lawyers must be fluent enough in AI to understand what a task is worth – its value, not the time it takes. They must be able to scope, price, and deliver work based on outcomes, not effort.

The inflection point is here

PwC’s survey correctly identifies this moment as an “inflection point”. Amongst the matrix of challenges they face elsewhere – risk from geopolitical uncertainty and cyber threats, amongst others – the firms that thrive will be those that move beyond tactical AI experiments and commit to a holistic business transformation.

The top priority for law firm business support functions is no longer just working capital; it is now, unequivocally, to “improve the use of technology”. This must be tied to a coherent strategy that understands new risks and, most importantly, fundamentally rethink the firm’s economic model.

The opportunity, as we concluded in our report, is to leverage AI to automate the routine and “elevate the client relationship”. By freeing lawyers to focus on the high-level strategic advice that technology cannot replicate, firms can evolve from service providers to indispensable strategic partners.

The message from this year’s data is clear: resilience built on the old model is a fading asset. Future-proofing your firm requires building strong foundations in governance, training, and a new economic relationship with your clients.