Law Firm Revenue Soars 12% as Lawyers Get Back to Being Busy

Law firm revenue grew nearly 12% through three quarters compared with last year, driven by strong demand for lawyers’ time and a productivity boost, according to Citi’s law firm banking group.

The largest law firms posted the biggest gains, continuing a trend. Top lines at the 50 largest law firms grew 14% through three quarters, demand at those firms grew 3.6%, and productivity rose 2.9%.

“It’s going to be one of the strongest years on record,” Gretta Rusanow, managing director and head of advisory services at Citi Law Firm Group, said in an interview. “There is a lot of good news in these nine months of results.”

The figures are a welcome sign for an industry that struggled over the past two years to match the rapid pace of work during the pandemic. “We continue to see demand momentum build from one quarter to the next,” Rusanow said.

Citi’s Global Wealth at Work Law Firm Group provides banking and financial services for many of the country’s law firms and surveys them throughout the year to provide financial snapshots of the industry.

The three-quarter survey doesn’t include profitability numbers, but revenue growth was running ahead of expense increases, which were 7.5% through the first three quarters. General overhead expenses drove the increase with growth of 8.2%, compared with 6.7% for compensation, Citi said.

Demand grew 3.2% across the industry, Citi data show. With headcount growth of 1.3% moderating toward historical norms, firms have seen a boost in productivity—or the average hours worked per lawyer. That figure is up 2.2% from the year-ago period, Citi said.

In a positive sign for law firms, the demand growth was spread across a variety of practices, Rusanow said. Demand has been strong in practices including litigation, regulatory, funds and investment management, and bankruptcy and restructuring, she said.

Law firms in recent years have ridden the bumpy wave of transactional demand, but they are faring well despite a relatively quiet deals environment this year.

“It’s interesting to see just how much in demand law firms are this year even outside of a rebound in transactional activity,” Rusanow said, noting that she expects that rebound in M&A work to appear soon.

On the expenses front, law firms have seen an increase in technology spending as new versions of practice management and financial management tools have rolled out this year, Rusanow said.

Generative artificial intelligence has also added some costs, said Gloria Gomez-O’Rourke, senior specialist at Citi’s Law Firm Group advisory team.

“There’s a greater focus on technology,” she said. “That’s something we’ve heard loud and clear from many of our clients this year.”