– which asks law firms to rate how they feel about the market outlook – fell from 4.2 out of 5 to 3.8, with many citing the economic headwinds caused by rising inflation and interest rates.Law firm leaders have also been watching the US legal market with concern, with many of the biggest firms there now conducting mass layoffs – usually via performance reviews for associates – to correct “over-hiring” during the long boom from 2019-21.
“The biggest issue for any of us will be the revenue challenges playing out as the locked-in expense cost inflation of the last year – mostly wage increases – puts pressure on profitability.”Adrian Tembel, chief executive partner at Thomson Geer, told his staff in an email this week that the outlook for the legal sector was “sobering”.
“Expenses expanded at historically high levels, which, combined with flat revenues, places Australian firms in an exceptionally dangerous position to start the year.” The results were slightly better for the average large firm – especially on demand and fees worked – but the report said they were still on a “dangerous path”. The 10 large firms in Peer Monitor are Baker McKenzie, Colin Biggers Paisley, Dentons, Gilbert + Tobin, Hall“With utilisation for large firms contracting at a historically high 10.1 per cent and their by-title productivity far below the Q1’s for the last three years, large firms are seeing immense pressure on profitability.