August 7, 2023
2023 Recovery for the Law Firm Market Continued in Q2: Thomson Reuters Law Firm Financial Index
Strong demand and rate growth, especially for counter-cyclical practices including litigation
TORONTO, August 7, 2023 – Thomson Reuters (NYSE/TSX: TRI), a global content and technology company, launched a new report that notes the strong start for the law firm market in 2023 continued in the second quarter. Demand rose for the second consecutive quarter and when combined with strong rate growth, contributed to better law firm financial performance. Those were among the findings of the Q2 2023 Thomson Reuters Law Firm Financial Index (LFFI) powered by Financial Insights.
Demand for law firm services jumped 1.5%, a marked acceleration from the 0.1% gain in the first quarter. Meanwhile, average worked rates surged by 5.9% – the highest mark in more than a decade.
The demand growth was largely fueled by growth in bankruptcy and labor & employment. In addition, litigation work was up a strong 4.0%. Transactional practices were mixed, with corporate work up by 0.1% while tax and real estate work declined.
Fees worked, which serve as a strong indicator of revenues, rose by an average of 7.6%, growing faster than total expenses for the first time in a year.
The report notes that different ends of the market are employing divergent strategies to improve profitability. Midsize firms added the most headcount to increase capacity and were rewarded with the strongest demand growth among the market segments, up by an average of 3.7%. Am Law 100 firms, on the other hand, were the only segment to reduce headcount, cutting their associate ranks by 2.5% since the beginning of the year as part of aggressive cost-cutting moves. Am Law 100 firms’ demand grew by a much smaller amount at 0.3%. The report concludes that both strategies proved effective for improving profitability in the second quarter.
“The law firm market built upon this year’s promising first-quarter results with even stronger demand and rate growth in the second quarter,” said Paul Fischer, president, Legal Professionals, Thomson Reuters. “If current trends continue, the market could be headed for a positive full-year 2023. Firms, however, still need to be mindful of headcount, expenses, and shifting growth among practice areas to achieve sustainable profitability.”
A copy of the Q2 2023 LFFI report can be downloaded here.
The LFFI, produced by the Thomson Reuters Institute, is a composite index of law firm market performance using real-time Financial Insights data drawn from major law firms in the United States and key international markets.
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