Global drop in demand for law firms’ services due to “interest rates and inflation”

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Law firms have seen demand in services drop globally over the first half of 2022, according to new research by Thomson Reuters.

The research has shown that US firms are achieving greater growth than their British and Australian rivals. Demand for US services has seen continuous expansion, where the demand for UK firms’ services has just about broken even.

In the second half of 2021, UK firms saw growth of 8.3% compared to just a 4.3% growth for US firms in the same period. In contrast, over the past six months demand in the UK for legal services has plateaued while US firms saw demand increase 1.1% in the first six months of 2022.

Australian firms tell a similar story to the UK, with business dropping from a 6.4% surge over the last half of 2021 to just 2.1% in the first six months start of 2022.

Bill Josten, an analyst at Thomson Reuters, explained that “a strong last half of 2021 turned into a much tougher half 2022 as interest rates and inflation impacted global economies”.

This follows a trend in lessening demand for legal services after the so-called boom in 2021 following the pandemic. An increase in demand for talent also occurred at this time, with larger salaries being offered to hire and retain top candidates, according to City AM.

However, Thomson Reuters research showed that 20.7% of UK law firms expect a higher-than-average staff turnover this year, compared to an expected rate of 13.2% for their US rivals.

Despite these inequalities, the Financial Times reports that magic circle law firms Freshfields Bruckhaus Deringer LLP, Clifford Chance and Allen & Overy LLP “succeeded in poaching partners from US rivals, after loosening old pay structures and spending millions on their expansion in America”.