On the whole (at least according to the recent Citi Private Bank Law Firm group’s mid-year survey), law firm leaders seem pretty confident that their economic situation will improve as the year progresses. For example, law firm leaders felt confident in resurgent demand. On a scale of 0 to 200, where 100 is neutral, the survey results indicated a confidence level of 127. Realizations were also a source of at least comfort, if not confidence, with an index score of 102.
While law firm leaders reported confidence in their demand picture for the year, Q2 results actually show demand contracting for large- and midsize law firms. The drop of 0.9% represented the second-largest demand contraction in more than three years. Moreover, when examined in terms of practice demand, nearly all key practices were down from the previous year, with the exception of corporate work and patent prosecution, which showed growth of 0.1% and 0.2% respectively.
Law firm leaders may well be correct that there will be an increased demand for legal services throughout the remainder of the year. With the uncertainty surrounding issues like the potential impact of Brexit or the US presidential election, clients are likely to have concerns around how to proceed in a volatile market. But it is not a fait accompli that this work will go to those large law firms.
Trends showing an increasing appetite on the part of corporate counsel to bring more work in-house or perhaps explore options down-market are unlikely to abate. Additionally, chief legal officers have not been shy about expressing their dismay at the decision by many large law firms to join the ranks of those that recently increased associate salaries. While it may be too early to tell how great the impact from this displeasure will be for law firms, it is certainly an issue to keep in consideration when looking toward the end of the year.
It’s encouraging to see that law firm leaders feel confident approaching the latter half of the year. However, it is vital that this sense of confidence be based on the reality that firms are experiencing. Firms should not be shy to capitalize on true opportunities for growth, just so long as it is a genuine opportunity and firms are not just pursuing growth for its own sake.