Law Firms
Global trade war poses ‘rocky’ future for law firms, Thomson Reuters Institute report says
The global trade war boosted nearly every major practice area for law firms in the first quarter of 2025, but the months ahead “may be rocky indeed.” (Image from Shutterstock)
The global trade war boosted nearly every major practice area for law firms in the first quarter of 2025, but the months ahead “may be rocky indeed,” according to a summary by the Thomson Reuters Institute of its latest Law Firm Financial Index.
Firms found themselves “flooded with client demand” for legal work in March because of the trade war, according to the Law Firm Financial Index report, available here.
Also on the positive side, firms increased worked rates—the prices that clients pay after negotiations—by 7.3% in the first quarter compared to the first quarter of 2024.
“Law firms, from midsize firms up to and through the Am Law 100, pushed their most aggressive rate increases since 2005,” according to a May 5 press release.
But a deteriorating U.S. economy could lead to long-term weakening of transactional work, “considered the bedrock of large law firm performance,” according to the summary.
The report noted “an eerily similar surge in legal demand” when financial markets began decreasing in 2007. Large decreases in demand and pricing power followed.
“It took law firms the better part of a decade to rebuild” demand for transactional and counter-cyclical practices to levels achieved before the financial crisis, the report said. Counter-cyclical practices, such as litigation, bankruptcy and labor and employment, typically rise in a slowing economy.
Reuters and Law.com covered the report.
The Law Firm Financial Index is a composite score based on the quarterly change in rates, demand, productivity and expenses of major firms compared to the same quarter a year ago. The index, based on results from 195 firms, decreased 13 points to a score of 51 in the first quarter.
One practice that is underperforming is mergers and acquisitions, according to the report. It increased 2.6% in the first quarter, compared to the same quarter last year. That growth “may be below the grand expectations of the marketplace,” the index report said.
Another emerging challenge for firms is an increase in direct expenses stemming from aggressive competition for talent and performance bonuses.
“Worryingly,” the report said, “direct expenses grew 7.6% on a rolling 12-month average, actually surpassing the record rate growth of law firms.”
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