Larger law firms had 'buoyant performance' in first quarter of 2024; revenue, demand and rates are up
Law firms had a robust first quarter of 2024, helped by growth in billing rates, according to two reports released within the past week. (Image from Shutterstock)
Law firms had a robust first quarter of 2024, helped by growth in billing rates, according to two reports released within the past week.
The Thomson Reuters Institute reports that firms had “a buoyant performance” with “strong revenue factors and moderated expenses.” Reuters had coverage of the institute’s Law Firm Financial Index report, available with the report summary here.
The first quarter growth in worked rates—the price that clients paid after negotiations—was 6.4% compared to the first quarter of 2023, setting a new high, according to the index report. Growth in real rates—which is rate growth adjusted for inflation—tied for the highest level since the financial crisis in 2007-2008.
The report also found that first quarter demand for legal services increased 1.9% in the first quarter of 2024, compared to the same period in 2023, driven partly by a 3.8% increase in demand for litigation services. Demand for bankruptcy work also increased at a somewhat smaller rate of 3%. On the negative side, demand for the mergers and acquisitions practice area decreased 3.9% in the first quarter of 2024.
The index is based on financial metrics for 186 firms, including 103 firms in the Am Law 100 or 200, Reuters explains. The index increased by two points for the first quarter of 2024, signaling that firms’ current financial situation is more stable, according to the index report.
Wells Fargo’s Legal Specialty Group is also reporting positive first quarter reports from its collection of data from 64 of the Am Law 100 firms and from 38 of the Am Law Second Hundred firms.
The report found that firm revenues increased 9.5% in the first quarter of 2024, which was more than double the growth rate for the same period last year. The increase is based on a comparison of the first quarter of 2024 with the same period a year ago.
Most affecting revenue growth was a 9% increase in standard rates for lawyers, compared to the first quarter of 2023, according to a Wells Fargo summary prepared for journalists. Law.com had coverage.
Lawyer demand, which comprises billable hours logged, increased 2%, while productivity increased 1% to 1,554 hours per lawyer in the first quarter of 2024, according to Law.com.
Owen Burman, senior consultant and managing director with the bank’s Legal Specialty Group, told Law.com that there is some volatility in the 2024 outlook.
“In mid-February, firms were pretty bullish. That is starting to temper a little bit,” Burman told the publication, noting that there are concerns about deal flow and inflation.
