Large US law firms have experienced the sharpest quarterly drop in performance since the credit crunch, with demand for legal services falling by 6%, research by Thomson Reuters has revealed.
Demand for big firms’ services in the second quarter of 2020 fell 6% year-on-year and productivity across all fee earners declined by 7%. Real estate was hit particularly hard with demand dropping by 12%, while demand for litigation shrunk by 8% due to court closures and the postponement of cases. Bankruptcy was one of the few practices that saw increases in demand, rising 6.2% in the second quarter.
Meanwhile, according to Thomson Reuters’ Peer Monitor Economic Index (PMI) – which looks at demand, productivity, rates and expenses – the large law firm market dropped 6 points to 51, the sharpest drop since 2009. A PMI of 65 or greater indicates strong law firm market performance.
Firm leaders have rapidly cut spending and while furloughs and layoffs 'have not yet become ubiquitous amongst the lawyer ranks', they are more widespread among support staff.
Mike Abbott, vice president of market insights at Thomson Reuters, said: 'While many firms are successfully adjusting their business models to work-from-home, they are still subject to the volatility and uncertainty surrounding their clients as well as the overall economy.
'We see law firms making rapid adjustments to better suit the current conditions – investing in productivity-enhancing technologies such as collaborative and remote work solutions, while reducing expenses in other areas such as overhead. More uncertainty lies ahead in coming months, but firms are clearly making efforts to improve efficiency and flexibility to deal with what’s to come.'
In February, Thomson Reuters reported that the market was enjoying the best two-year period since the end of the last recession.