Law firms have commenced 2024 on a positive note, rebounding from a lackluster performance in 2023 marked by tepid client demand and diminishing collections. The latest financial data reveals promising trends across key metrics, showcasing a robust trajectory for the legal industry.
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Increased Demand and Billing Rates
According to the Thomson Reuters Institute’s Law Firm Financial Index, demand for legal services surged by 1.9% in the first quarter of 2024 compared to the same period last year. Notably, billing rates continued their upward trajectory, registering a 6.6% increase year-over-year, a trend that has remained consistent and buoyant for law firms.
Midsize Firms Lead Growth
The growth in billing rates was predominantly driven by midsize law firms, which saw a remarkable uptick in revenue by 5.7% and firm profits by 5.8%. These gains were achieved while effectively managing direct expense growth to just 5.4%, highlighting prudent financial management strategies.
Litigation Dominates Demand
The surge in demand for legal services was primarily fueled by litigation, witnessing a robust growth of 3.8% in the first quarter. Concurrently, bankruptcy demand surged by 3%, while labor and employment demand experienced a modest uptick of 1%.
Corporate Practices Face Challenges
However, demand for corporate practices exhibited a slower growth rate, with an increase of only 0.6% over the same period in 2023. Particularly, demand for M&A practices faced a decline of nearly 4%, amidst prevailing uncertainties exacerbated by high interest rates.
Technology Investments on the Rise
In a notable shift, law firms are increasingly channeling investments towards technology, signaling a strategic response to evolving market dynamics. Technology spending surged by 6.6% above the rate of inflation, reflecting a growing