Slow growth for law firms in 2017
Law firms are set for bigger expenses and slower growth in 2017, according to Citibank’s quarterly report.
Figures for law firms will feature margin compression, low-single-digit growth in revenue and profits and continued dispersion and volatility in performance by the end of the year, according to quarterly reseach from Citibank. The report predicts revenue for law firms in 2017 will look like 2016 on the profits front as higher revenue growth will be offset by greater expenses in hiring and technology. The research revealed a 4.9 per cent growth at the six-month point, flat from the first quarter. As in the past six years, revenue growth was driven by billing rate increases at 3.8 per cent. With total demand slightly up 0.4 per cent, lawyer demand, the more valuable hours, was up by 1.6 per cent. Citibank say this was the biggest rise in the last four years at the halfway point. It also found that improvement in the collection cycle of 1.1 per cent also helped increase revenue.
Expenses increased by 5.1 per cent due to the combined impact of increased associate compensation and lawyer head count growth of 1.9 per cent, which drove lawyer compensation expense up 7.5 per cent, compared to 3.0 per cent at the six-month point of 2016. In contrast, operating expenses were up 3.3 per cent with technology (particularly cybersecurity-related costs) said to be a big contributor to this increase.