Legal tech firms are needed to meet an unmet need to support small t0 medium businesses (SMEs) with legal issues, new research for LawtechUK, the government-backed initiative within Tech Nation, and the Legal Services Board (LSB) has revealed.

In the qualitative study, 40 SMEs from different sectors (10 of which had previously used lawtech) were asked about their business’s legal problems and how they access legal advice and support.

According to the research, SMEs’ legal needs fell broadly into two categories: reactive, for example, debt recovery, dispute resolutions, or HR issues, and proactive, for example, routine legal document drafting. 

Jenifer Swallow, LawtechUK director at Tech Nation, said: “SMEs make up 99% of all UK businesses and 60% of jobs, and are fundamental to our communities, yet too often they end up ‘going it alone’ when it comes to legal issues. Owners of SMEs are often time poor and accessing legal services is seen as too hard, too expensive and a low priority compared to the list of pressures they face running their business. 

“Speaking to SMEs, they point to a clear role for lawtech, giving them access to legal support that is timely, affordable, convenient and reassuring – and, importantly, that increases their resilience over time. The debate is often framed around technology replacing existing services, but our research shows that lawtech offers new opportunities for legal service providers to meet the unmet needs of SMEs and make many people’s lives easier in the process.

“For lawtech innovators, our research shows that the SME market is one where transformative legal products can thrive, and support the tens of thousands of SMEs in need of their assistance.” 

The research revealed that:

• Many SMEs do not know when or whether to involve lawyers – and some do not recognise when they have a legal problem.
• Across the board, SMEs are frustrated that getting legal issues resolved can be costly and time-consuming. 
• SMEs are looking for solutions that are good value for money, won’t take up too much of their time, and that provide reassurance.
• Most SMEs can see a role for lawtech solutions, particularly for their most common legal needs, such as finding a legal service provider in the marketplace and preparing legal documents.
• Many SMEs see lawtech solutions as complementing existing services, and/or bridging a gap between traditional legal providers and ‘DIY law’ and noted the importance of access to in-person support alongside digital tools.

Earlier this year, the Lawtech UK Report 2021 revealed that UK SMEs could make cost savings of up to £8.6bn each year by using lawtech products and services. Unmet demand from UK SMEs and consumers was also valued at up to £11.4bn annually.

In its recently published strategy for the legal services sector, the LSB outlines its mission to reshape legal services to better meet society’s needs, which includes addressing the unmet legal need of small businesses through effective regulation. Research by the LSB shows that only a quarter of small businesses obtain professional help to deal with legal issues, while half try to handle them alone. And just one in ten small business owners view lawyers as cost-effective.

Matthew Hill, chief executive of the Legal Services Board, added: “Too many businesses are still not getting access to legal services that would help them. Technology offers potential solutions by making services more convenient, easier to use and often cheaper.

“That’s why the LSB is setting an open stance for regulation and technology in the legal sector. We encourage legal regulators to actively reach out to innovators to foster innovation that increases access to legal services. We’d like to see them looking for opportunities to collaborate with innovators to identify and reduce barriers – be they technical, practical or about confidence. Then, by developing appropriate regulatory frameworks, regulators can build trust and confidence in the legal services market and help reduce unmet legal need.” 

LawtechUK commissioned Community Research to carry out a qualitative study. LSB provided expertise in researching legal issues with SMEs. The research started with an informal review of existing research on SME legal issues and attitudes towards and use of traditional legal services and lawtech solutions. This was followed by a 1-week online forum of participants from 40 SME’s from different sectors across England and Wales, exploring their legal needs experiences of legal services providers and impressions or experiences of using lawtech solutions. This was then followed up by 30-45 minute depth interviews with half (20) of the forum participants on their particular journeys.