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2019 shaped up to be a solid, if not spectacular, year for revenue growth in the legal industry, according to a recent report by Citi's Law Firm Group and Hildebrandt Consulting. While the first 9 months of the year did not match 2018, revenue trended upward and 2019 ended on a strong note. The report concluded there is reason to be optimistic for 2020, although it still urged law firms to avoid overreacting to positive signs of economic health. The report predicted up to 6% revenue growth for 2020, which would match 2019. It also predicted continued consolidation and lateral hiring.
Rate increases accounted for most revenue growth, rather than demand for legal services. There was less than 1% growth in demand for the year. The Citi report numbers were similar to the Thomson Reuters PMI index. With an increase in headcount at law firms, relatively stagnant demand means productivity is down, perhaps one reason for the number and frequency of lateral moves.
While demand largely held steady in 2019, there is reason to believe it may grow in 2020. In the “Litigation Trends Annual Survey," 35% of in-house counsel predicted an increase in litigation in 2020. That suggests business litigation may drive demand next year. In addition, while Am Law 50 to 100 law firms had the highest demand growth, no sector saw an overall decrease. This indicates a healthy demand for legal services that should continue into 2020.
Another solid year of revenue does not mean a return to the old ways of doing business for law firms. In 2019, it is no surprise that the lowest job growth was in equity partnerships. Equity partnerships rose just .03%. Still, compared to losses in previous years, even holding steady is an improvement. Meanwhile, contract and temporary work continued their ascendancy; most law firms expect to increase temp and contract work in their firms for the coming year. Even more, 84%, plan to increase junior associate numbers.
Law firms will likely continue to raise revenue and increase flexibility through low-cost hiring and work fulfillment in 2020. The takeaway is that lawyers are still likely to find employment through temp/contract work, a junior associate position, and lateral moves that may not include an equity partnership. The unprecedented level of lateral moves, alternative fee arrangements, and legal outsourcing should continue.