Law Firm Growth Continues, Led by Resurgent Transactional Practices

TORONTO, Aug. 5, 2024 – Thomson Reuters (TSX/NYSE: TRI), a global content and technology company, released a new report showing continued strong growth for law firms amid a resurgence in transactional practices and solid fundamentals in the second quarter of 2024. The Q2 2024 Thomson Reuters Law Firm Financial Index (LFFI), powered by Financial Insights, showed a healthy outlook for law firms with overall demand up 2.4% compared to Q2 2023.

Growth in demand was led by the counter-cyclical practices of litigation – which grew at 3.4% – followed by bankruptcy, up 2.4%, and labor & employment, up 2.2%. Yet a notable Q2 shift in demand showed that counter-cyclical practices are no longer the sole drivers of overall growth.

Demand for transactional practices, which includes general corporate, M&A, real estate and tax practices, returned to growth mode for law firms following nearly three years of subpar performance. Transactional fees worked – a proxy for revenue – saw the greatest Q2 resurgence of any cyclical practice group, driven by increased billing rates.

In addition, the strong growth in worked rates from Q1 2024 continued to hold in Q2. Worked rate growth was at 6.6%, up from 6.4% in Q1, which saw the fastest Q1 pace of growth since the Great Financial Crisis.

Lawyer productivity growth turned positive – coming in at 0.4% – for the first time since the transactional boom of Q4 2021, when pandemic lockdowns were ending and the U.S. economy was strong. In Q2 2024, 54% of firms had lawyers billing more hours compared to Q2 2023.

“Law firms’ recovering productivity rates may be an early indicator of the impact AI and generative AI tools are having on their ability to streamline workflows and free up lawyers for more strategic activities,” said Raghu Ramanathan, president, Legal Professionals, Thomson Reuters. “In the Future of Professionals report, 79% of law firm respondents expected AI to have a high or transformational impact on their work within the next five years. Firms that embrace new legal tech tools will be best positioned to better serve their clients, enabling them to sustain their success far longer than firms on the AI sideline.”

Finally, law firms continued to keep expense growth in check in Q2. Direct expenses grew 5.3%, down from 5.4% in Q1, while overhead expenses notched a 5.0% increase, down from 5.5% in Q1. Firms were better able to manage expense growth in part because they no longer faced the pressures of talent bidding wars and skyrocketing associate salaries.

A copy of the Q2 2024 LFFI report can be downloaded here.

The LFFI, produced by the Thomson Reuters Institute, is a composite index of law firm market performance using real-time Financial Insights data drawn from major law firms in the United States and key international markets.

Thomson Reuters

Thomson Reuters (TSX/NYSE: TRI) (“TR”) informs the way forward by bringing together the trusted content and technology that people and organizations need to make the right decisions. The company serves professionals across legal, tax, accounting, compliance, government, and media. Its products combine highly specialized software and insights to empower professionals with the data, intelligence, and solutions needed to make informed decisions, and to help institutions in their pursuit of justice, truth, and transparency. Reuters, part of Thomson Reuters, is a world-leading provider of trusted journalism and news. For more information, visit tr.com.

Media Contact
Jeff McCoy
+1.763.326.4421
jeffrey.mccoy@thomsonreuters.com