A new report shows that Australia’s large law firm industry has made great strides in the past six months, but still faces challenges in the year ahead.
Despite economic concerns related to labor shortages and ongoing supply chain disruptions, Australia’s legal services market remained strong, even as new clouds loomed on the horizon, in the form of higher shipping costs. compensation.
Indeed, the legal market for large law firms in Australia achieved strong results in the first half of fiscal 2022, according to a new mid-year market report from the Thomson Reuters Institute.
The Australian Legal Market Mid-Year Update showed that average demand for law firm services grew by 6.4% in the first half of fiscal 2022, a strong result considering that Australia has not suffered from the severe contraction in demand that was reflected in elevated results in the market of the United States for much of 2021.
The growth in industry demand has been driven by forces familiar to those watching the large Australian and North American law firm industries: strong growth in transactional practices. Mergers and acquisitions (M&A), tax, banking and finance, and general corporate work all posted average growth of more than 10% year-to-date through the middle of fiscal 2022. M&A growth of Australia has been fueled by merger schemes. and acquisitions, with a large amount of that fuel coming from mining companies registered in Western Australia.
the talent question
The increase in the demand for legal services has resulted in a solid performance in terms of agreed or worked rates. Average law firms saw their work rates grow at a much faster rate than average in every year since 2014.
Additionally, data collected from the client side indicates that demand is unlikely to decline. A survey of corporate general counsel (GCs) compiled by Thomson Reuters found that the only major practice area expected to decline, according to GCs, was banking and finance, while corporate regulatory practice was most favored for business. future growth.
With all this potential growth in demand, Australian law firms are moving to increase their legal staff. Year-to-date, the ranks of skilled fee-earning workers at the average law firm grew 4.5%, with the potential for further growth as demand continues to rise.
While it may be helpful for law firms to hire more legal professionals to handle increased demand, law firms must be careful not to fall into the trap of relying solely on salary increases to protect against attrition.