Layoffs unlikely as law firms see increased revenue from rate hikes, Wells Fargo official says
As a result of revenue growth, “I don’t think the term ‘layoff’ will come into play,” said Owen Burman, senior consultant and managing director with Wells Fargo’s Legal Specialty Group. Image from Shutterstock.
Law firm revenue increased 4.6% through the third quarter of the year, thanks to a hike in billing rates, according to a survey of more that 120 firms by Wells Fargo’s Legal Specialty Group.
Standard billing rates were up 7.9% when comparing the first nine months of the year to the same period last year, according to the survey. The amounts ranged from 8.2% for firms in the Am Law 100, which consists of the nation’s top 100 grossing firms, to 6.4% for firms in the Second Hundred.
Firms continue to benefit from “some of the highest growth in billing rates we’ve seen,” Wells Fargo said in a summary for the press.
Net income increased 2.7%, and profits per equity partner increased 1% through the third quarter. But the results varied by firm. Net income increased 5.2% for the nation’s top 50 grossing firms and decreased 3.9% for Second Hundred firms. Profits per equity partner were up 1.9% for Am Law 100 firms and down 4.7% for Second Hundred firms.
As a result of revenue growth, “I don’t think the term ‘layoff’ will come into play,” said Owen Burman, senior consultant and managing director with Wells Fargo’s Legal Specialty Group, in an interview with Law.com.
But firms could still cull associate numbers through aggressive reviews, he said.
Burman told Reuters that firms may be reluctant to match associate pay hikes of $10,000 announced by Milbank earlier this month. Firms were raising rates to cover other costs, and they weren’t expecting salary increases.
Highly profitable firms would be able to match the increases, but “the Second Hundred really does not show any capacity to absorb any kind of additional cost pressure,” Burman told Reuters.