Law firms stayed busy in second quarter but uncertainty looms
Demand for law firm services rose 1.6% over the second quarter of 2024 and billing rates were up 7.4% over that period, making it an 'unexpectedly prosperous' quarter, according to Thomson Reuters Institute's Law Firm Financial Index, opens new tab, released on Monday. The Thomson Reuters Institute and Reuters share the same parent company.
President Donald Trump's global trade policies have helped fuel demand for law firm services as clients navigate ever-changing tariffs, the institute found earlier this year. Clients are also looking to law firms to help them manage shifting regulations and a cooling economy.
But the firms have reason to be cautious, Monday's report warned. Demand growth was not uniform across law firm segments, for one thing, while direct and overhead expenses continued their upward trend.
'We had a strangely good quarter, but we're also starting to see some red flags coming up,' said Isaac Brooks, the institute's manager of industry data analytics. 'There's a lot of downward risk, not just in the legal industry but in the broader economy.'
Demand declined 0.6% year-over-year among the 100 top-grossing U.S. law firms as ranked by the American Lawyer, the report found, but it rose 2.6% among the next-largest 100 firms and increased 3.5% among midsized law firms.
Those shifts suggest that clients may be looking to cut costs or want more specialized legal help, the report's authors said. Declining demand among international clients also hit the largest firms harder, they said.
Demand growth also varied significantly by practice, the report found, as 'economic fear and anxiety' drove demand in some areas but not others. Litigation demand was up 2% in the second quarter compared to the previous year, but corporate work saw more modest demand growth of 1.3%. Demand for mergers and acquisitions work was up 0.3%, while intellectual property demand fell 1.4%, deflating earlier hopes that 2025 would be a particularly strong year for transactional practices.
The index compiles financial quarterly metrics from 195 large and midsized U.S. law firms and assigns an overall score based upon key factors such as demand, productivity, billing rates and expenses. The score for the second quarter of 2025 was 55, up four points from the first quarter.
Lawyer productivity was down 1.3% from the previous year, though it increased slightly from the first quarter of the year. Collections were also down slightly in the second quarter, reflecting an increase in unpaid bills and write-downs on legal work. That could become a problem for firms if the trend continues, the report warned.
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Trade war boosted law firm demand in early 2025 but challenges lie ahead, report says
Law firms saw strong profits in 2024, study finds, but demand expected to ebb in 2025
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