Even as Covid-19 threatened to upend the legal industry, firms tightened their reins and chalked up a robust 5.7% increase in revenues in the first nine months of the year, according to a new report.
The nine-month survey from Wells Fargo Private Bank’s Legal Specialty Group said firms took advantage of investments in remote access and automation this year. They also applied lessons from the Great Recession, more strictly managing areas like workforce size and expense outlays, the report said.
“Despite a mountain of industry challenges, 2020 will likely turn out to be better than most firms had anticipated,” it concluded.
Firms also implemented “meaningful rate increases, boosted by a mix shift to higher-value partner work,” according to findings from 120 firms that the Wells Fargo legal group surveyed.
Not all firms, however, shared equally in the positive results. The growth rates “were uneven among tiers with AmLaw 1-50 firms growing revenue a remarkable 7.6%. The AmLaw 51-100, 101-200 and regional firms all grew their revenue at less than half of 5.7%.
There were also noticeable differences among geographies.
Major markets, like New York, reported a growth in demand between 0.9% and 2.4%, driven by areas including capital markets, restructuring and technology/life sciences matters, the survey said.
Firms in other markets suffered declines in growth, between 1.3% and 3.8%. Those areas include Pennsylvania/Delaware, the Great Lakes, the Southwest (primarily Texas), and Florida.
Some 72% of firms surveyed reported increases in revenues, “fueled by standard rate increases, flat demand and stable realization,” the survey said.
Despite some of the trends, the report expressed optimism about “the agility of the legal industry and the resiliency of the economy.” It said legal services demand “should grow next year as more industries participate in the continued economic recovery, along with the pent-up demand for litigation and M&A.”
The report also found that:
- The nine-month revenue increase of 5.7% was .7% lower than the first six months of the year, and .5% lower than the same period in 2019.
- Revenue per lawyer grew 3.8% over the first nine months of the year, trailing overall revenue growth as standard rate increases of 6.2% were offset by productivity declines. But, the AmLaw 51-100 firms reported flat revenue per lawyer growth as productivity “plummeted.”
- Equity partner productivity went up .4%, but associate productivity fell 3.8%.
- The pandemic accelerated the trend of reducing staff, resulting in a 5.1% decline in legal secretaries compared to the same period in 2019. 77% of firms made such reductions, and 62% of firms reduced other non-legal staff.