Law firms are seeing 'significant resurgence' in financial health, new report says
Most major practice areas experienced growth in the second quarter of 2024, leading to “a significant resurgence in the financial health of law firms,” according to the Thomson Reuters Institute. (Image from Shutterstock)
Most major practice areas experienced growth in the second quarter of 2024, leading to “a significant resurgence in the financial health of law firms,” according to the Thomson Reuters Institute, which released its latest Law Firm Financial Index.
Three countercyclical practices increased from the same period last year, according to the report, available at this Aug. 5 press release. Litigation demand increased 3.4%, bankruptcy increased 2.4%, and labor and employment increased 2.2%.
But countercyclical practices are not the only driver of growth, the report says.
“After nearly three years of poor performance, transactional demand has returned to growth mode,” the report says.
Transactional practices include general corporate work, mergers and acquisitions, and practices in real estate and taxes.
Firms in the Am Law 100, which include the nation’s 100 top-grossing firms, are seeing most of their growth in transactional practices, while midsize firms rely on countercyclical practices. Firms in the Am Law Second Hundred, on the other hand, have found “a Goldilocks zone, benefiting from significant growth in both areas,” the report says.
Overall demand for legal services increased 2.4% in the second quarter of 2024, compared to the second quarter of 2023. Worked rates—also referred to as negotiated rates—increased 6.6% in the second quarter of 2024, up from 6.4% in the first quarter of 2024. Productivity also showed a positive gain for the first time since the fourth quarter of 2021, with an increase of 0.4%.
The positive financial results have lifted the Law Firm Financial Index score to 67, an increase of eight points. The number is the third-highest level since the 2007-2008 global financial crisis and “one of its highest scores of all time.”
The Law Firm Financial Index is a composite score based on firm rates, demand, productivity and expenses. It is based on data from major firms in the United States and key international markets.
A key takeaway of the report is that firms “are now in a more sustainable position compared to previous peaks,” according to Thomson Reuters.
