Business of Law

Law firm revenues rose nearly 6 percent in the first quarter, but the good news may not last

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Law firm revenue grew 5.8 percent in the year’s first quarter, the strongest growth since the first quarter of 2008, according to a survey of 176 law firms by Citi Private Bank.

Revenue growth outpaced the 3.2 increase in expenses for the first quarter, according to an American Lawyer article (sub. req.) by two client advisers with Citi Private Bank’s Law Firm Group. The revenue hike was driven by increases in demand and billing rates, as well as strong collection efforts.

In the first quarter of 2015, on the other hand, revenue grew only 2.3 percent while expenses grew by 3.9 percent.

The 2016 findings are based on a survey of 124 of the nation’s 200 largest law firms, as well as from a survey of 52 smaller law firms.

The 2016 findings represent “positive signs heading into the second quarter,” but the article cautions against too much optimism. When focusing on the 144 law firms surveyed in 2014, 2015 and 2016, about 47 percent had demand that increased in 2015 and was down in 2016, or that was down in 2015 and up in 2016. That represents an increase in volatility of 33 percent, which is significantly higher than volatility in the years before the recession.

“While there are growth opportunities in the market, continuing macroeconomic uncertainty and the looming U.S. election will be key factors,” the article says. “It’s possible that it will be increasingly challenging for the industry to continue to outperform 2015’s performance as the year progresses and, as we forecasted late last year, that the legal industry will see levels of performance that are similar to 2015’s.”

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