How London Built the World's Best Legal AI Ecosystem Self-flagellation feels part of the British psyche these days. It has become fashionable to beat down on the UK, be that tech bros calling the country a 'museum' bereft of growth and innovation, Brits en masse recently voting against the status quo, or pro-Europe Londoners watching this all play out while mouthing 'I told you so'.

Business optimism is also plummeting. When the Financial Times reported that Shein had plans to ditch London for its IPO, they wrote that the real surprise was "that Shein had even entertained London in the first place." To compound matters, British fintech - the jewel in London's crown - was dealt a huge blow this month when UK payments darling Wise also chose to avoid listing on London's beleaguered stock market.

Amidst this malaise, though, there remains one stalwart of the British economy: legal services. And not only is London's legal sector flourishing, it's leading the way in legaltech and AI. It's no secret that AI is uprooting every industry, and professional services sit squarely in its non-sentient crosshairs. Within white collar jobs, lawyers - with their repeated document creation and need for reviewing extensive reams of information - are likely to see some of the most radical change. This isn't just about efficiencies, this is a near-trillion-dollar industry in which AI could generate $100,000 in additional billable time annually per lawyer (Thomson
Reuters Future of Professionals Report, 2024).

So what put London in the driving seat here? Why do law firms in NYC and even investors in the Bay Area concede that London is still streaks ahead in this vertical? The answer reveals the blueprint for winning any AI transformation race. The starting point is fierce competition. In the early years of the 2010s software explosion, law firms in the City of London were large but rarely bloated. With so many great competing practices all within a mile of each other, competition was relentless. Senior Partners were already used to having to prioritise efficiency, productivity and flexibility over headcount. Then, when more serious technology solutions came onto the scene around the early 2010s (think document creation software and legal workflow tools), these same law firms were nimble enough to capitalise. Dedicated legal innovation departments were set up to try to work out how SaaS and Cloud technologies could be woven into legal work. London-headquartered, international law firm, Addleshaw Goddard, as just one example, quickly built a team of 40 legal engineers and operations staff to keep the firm cutting edge. And all this was happening while US counterparts continued with their paper and office stamps. This might seem surprising, given America's reputation as innovator-in-chief. Why did Britain get the jump here ahead of its Transatlantic cousins, who were 'moving fast and breaking things'?

Crucially, the institutional players and incumbents were keen to come along for the ride. Allen & Overy (now A&O Shearman) and Mishcon de Reya, two of Britain's most established firms, both built incubator programs for startups. I vividly remember entrepreneurs from places like Singapore and Latin America moving to London to be part of FUSE, Allen & Overy's program. The Law Society of England and Wales created events and roundtables on legaltech and even partnered with startups looking to disrupt the industry. Not only did this start fostering entrepreneurial and digital talent in the London legal sector, but it also signalled to the rest of the industry that innovation was the direction of travel, whether people liked it or not.

It's also worth mentioning that the regulators helped too. The UK's laws on alternative legal services providers (ALSPs) allowed for firms to be owned by non-lawyers, a practice banned in most jurisdictions, such as the US and Germany. By allowing firms to list publicly or be bought by private equity, more business minds were brought into UK law firms. This, in turn, drove innovation acceptance. The final factor for London leading the legaltech race is the company you can keep in this brilliant city. When we at BRYTER were deciding on our first international market to expand to, our core axiom was that we needed to follow our customers. London, with its parade of skyscrapers packed with lawyers, was the obvious choice. But importantly, and unlike in other European professional services hubs, we knew that just down the road in Mayfair was Europe's most mature venture capital ecosystem.

London was already home to brilliant British-born funds like Balderton and Atomico, but also flourishing outposts from the American behemoths like Accel and Index Ventures, who had noticed that European startups were attractive (and cheaper) to invest in. This meshing of established law firms and venture capital led to a legal tech boom and significant exits such as HighQ (acquired by Thomson Reuters), Tessian (Proofpoint), Della (WoltersKluwer), Onfido (Entrust) and more. And, each of these liquidity moments forged a next generation of entrepreneurs and angel investors within the London ecosystem. This confluence of factors and attitudes is what London's legaltech dominance is built on. The combination of deep specialist knowledge going back centuries, open-minded institutional players, and the mixing of lawyers and VCs has set the city up to lead our industry for decades. But there's also a cautionary tale baked into this story. A warning for all the tech bros out there who see the AI-ification of professional services as the next gold rush. London's legaltech flourished because tools were built hand-in-glove with the traditional legal industry. It was always the law first, and then workflows, software and automation. For those of us looking to design the next era of the legal industry, we need to be spending as much time in the pubs of Lincoln's Inn as the boardrooms of Silicon Valley.