Feb 6 '13
According to a preliminary survey from Wells Fargo Private Bank’s Legal Speciality Group, 2012 wasn’t such a bad year for large law firms in the US.
In fact the survey told a story of revenue growth: an average of 5% to be precise. Net income rose by 6% and profits per equity partner jumped by an average of 5%.
The sample included over 50 of the AmLaw 100 and around 40 in the AmLaw Second Hundred. Jeff Grossman, the national managing director of the Legal Speciality Group, called the news a “surprise”. More interesting was the news that the Second Hundred outperformed the First Hundred.
This latest report from Wells Fargo bucks the recent negative trend and brings a much needed pat on the back for an industry that has been up against the wall since 2008.
Interestingly these positive growth figures stand in stark contrast to US GDP numbers that contracted in the final quarter of 2012. But what matters is that economic commentators stand confidently bullish about 2013.
And if we bring the recent Citi-Hildebrandt Report into the mix, which we looked at here, things certainly look positive for the legal industry. And remember: these are weighty and authoritative figures. Citi and Wells Fargo are two of the biggest lenders to law in the US. So these are sources close to the pulse and leadership of America’s biggest law firms.
David Lat of Above the Law said that if the positive growth can be replicated in 2013, US law firms will easily outpace the rest of the US economy.
However we would be right to be cautious. This is only the preliminary report and the full underlying data has yet to be revealed. Economic indicators remain unpredictable, reports are contradictory and broadly the direction of the economy remains hard to read.
Ultimately complacency must be avoided. As Grossman said, “law firms should not take their foot off the gas pedal on controlling expenses, or stop focusing on productivity” – so bullish caution should be the prescription going forward.
Undoubtedly the positive mood music coming out of the US law is good for the legal industry in Britain.
PWC’s Law Survey 2012 looked at the performance of the top 100 UK law firms in 2012. Market conditions remained challenging as deregulation and economic uncertainty continued. 82% of the firms profiled in the survey increased their fee income, but much of the growth in 2012 came from acquisitions as opposed to organic development.
Looking towards 2013 the UK legal services industry continues to look uncertain. The partner and leader of the PWC advisory group, David Snell said of the 2013 and the years to come:
“Looking ahead, firms are less confident than they were a year ago about the prospects for growth in the legal sector in the next three years, although about half of the Top 50 firms believe they will outperform the market for the period to 2015. There is a general view that the next 12 months will continue to be challenging, with some firms in the 11-25 rankings, in particular, acknowledging the challenges of an increasingly mature market and recognising further consolidation in the mid-tier is likely.”
However the survey underlined that law firms can differentiate themselves and boost revenue through process innovation, cost reductions and global expansion into emerging markets. The forecast looks bullish for the law firms ready to try new things.