Australian firms recorded higher legal demand and lawyer growth in FY 2021 than US firms did
The legal industry in Australia has shown its resilience over a challenging period by outperforming its US counterpart over FY 2021, a report released by Thomson Reuters Institute has revealed.
Findings from the 2021 Australia: State of the Legal Market report showed that legal demand for law firms in Australia rose by an average of 2.2% in this period, while US firms recorded an increase of just 0.5% in demand. Moreover, lawyer growth in Australia was up by 3.4% compared to the 0.5% increase in the US.
Major drivers of the demand boost in Australia came from work in the regulatory, M&A, banking and finance, and general corporate fields. Thomson Reuters described the overall boost in demand as a “major achievement amidst the challenges of the pandemic.”
“Australian law firms have proven themselves extremely resilient in managing through the tremendous ups and downs encountered over the past year. In particular, the sudden shift to remote working can be considered a success for the Australian legal market, enabling firms to uncover new efficiencies while providing their legal talent the flexibility and balance they had craved,” said Jackie Rhodes, Thomson Reuters’ managing director of Asia and emerging markets.
She explained that Australian law firms were able to implement strategic approaches to address the volatile market conditions and adapt the way they coordinated with clients. Factoring in increased rates (1.6% for the average firm) and lowered expenditures (3.5%), the average profit as a percent of revenue for firms jumped to 36.8% over a 12-month period ending 30 June.
“Law firms responded to market conditions with strategic approaches, and reimagining client experiences. Firms are taking the opportunity to serve clients better, which is helping to strengthen their relationships. The appetite for digital transformation has never been stronger, creating greater efficiency and flexibility in providing legal guidance,” Rhodes said.
Nonetheless, Australian law firms still need to watch out for potential obstacles.
“The conclusion of the Hayne Royal Commission will signal the end of legal advisory opportunities for which firms had so vigorously competed during the past few years. This will likely produce additional headwinds for firms,” Thomson Reuters explained.
Thus, firms must make crucial strategic choices on using technology to capitalise on growth opportunities.
“Skill, vision and innovation from law firm leaders all contributed to the positive FY 2021 results and the accompanying relief that Australian firms managed to weather the brunt of the storm and emerge in better shape than ever,” said Mike Abbott, Thomson Reuters’ vice president for market insights and thought leadership. “However, with continuing uncertainties ahead, further progress may rely on learning from the lessons of FY 2021 and capitalising on the best takeaways.”