Local firms have been besting their international peers in recent years
The Australian legal market is likely to become a beacon for global firms when it comes to responding to a tough environment, Thomson Reuters’ 2022 Australia: State of the Legal Market report has revealed.
The study findings indicated that Australian firms performed strongly in fiscal year 2022, with demand increasing by 6.4% in the first half of the year. This is despite concerns of coming recessions, soaring costs and The Great Resignation amping up the fight for talent. Thomson Reuters pointed out that Australian firms have been outshining their global peers in recent years, and 2022 has widened the gap even more.
“Australian law firms are uniquely positioned on the world stage, and continue to prove themselves remarkably resilient in dealing with conditions that are challenging law firms across the globe,” said Jackie Rhodes, Thomson Reuters’ managing director of Asia and emerging markets.
On average, fees worked saw an 8.7% boost in the Australian legal market, while billing realisation went up at a rate similar to that observed in the US. The average Australian firm recorded an overall revenue growth rate of 10%, while profits soared by 12.6%. Moreover, worked rate growth jumped to an average of 6.5% from 1.6% in the previous fiscal year.
Performance did decline in the second half of the year by 2.1% due to the slowdown in M&A transactions and other corporate work, which had driven much of the demand in the front half of the year. Nonetheless, the study findings indicated that the success of the Australian legal market has not hinged on just one practice area – rather, demand for expertise in fields like tax, real estate, and regulatory law saw a significant uptick as well.
“Finding ways to engage with legal talent is key. And the evolving intersection of talent and technology means new opportunities for firms to improve efficiency and drive a culture of digital transformation to the benefit of the firms, their lawyers and their clients,” Rhodes explained.
However, the strength of the Australian legal market has not meant that talent has been easy to come by. Thomson Reuters revealed that Australian firms logged a turnover rate of 31% for associates over the past year; while compensation went up 8.3% in this period, it is below the rate recorded by US firms (11.7%).
Technology plays a role in this – a recent survey conducted by Thomson Reuters indicated that 29% of lawyers were willing to transfer to a firm they regarded as more innovative. The State of the Legal Market results showed that Australian firms are responding by bolstering their tech investment over FY 2022 by 5.3%.
