While the big eight law firms have long been the cornerstone of Australia’s legal industry, a new report has revealed they are now facing growing competition from other large law firms vying for the top spot.
Ambitious large firms are increasingly challenging the longstanding dominance of the nation’s elite big eight, a new report from Thomson Reuters has shown.
Thomson Reuters’ Australia State of the Legal Market 2025 report has identified that large firms – those with more than 50 lawyers but traditionally outside the big eight circle – are no longer merely catching up but are emerging as serious contenders for a place at the very top of the market.
In FY25, larger firms saw a 5.4 per cent increase in overall demand for their services, while the big eight recorded just a 1 per cent rise.
The report revealed that, for much of the 2024–25 financial year, larger firms “led the pack” in profitability. They posted double-digit profits per equity partner (PPEP), while the big eight firms, by comparison, “struggled” to achieve similar growth.
This surge potentially has the scope to significantly reshape the legal profession, with the report noting that half of Australia’s top 10 firms by PPEP now come from the larger firm category – a feat that would have been unthinkable just a few years ago.
For decades, the big eight firms have been positioned as the first choice for high-value matters. However, the report cautioned that describing the Australian legal market as dominated by the big eight “would be a gross distortion”.
Instead, it highlighted that larger firms have consistently “outpaced” the big eight across some of the “most important metrics” in recent years, particularly in terms of “demand, rates, revenue, productivity, and especially in PPEP”.
Why is this occurring?
The report identified that the challengers’ rise has been powered by a bold two-pronged strategy – “aggressive demand growth and aggressive scaling”.
It found that large firms have expanded their lawyer headcounts by nearly 32 per cent since FY 2019, beating the big eight’s growth of 28.1 per cent.
However, large firms’ expenses also rose by 55.1 per cent over the same period, compared to a 41.1 per cent increase for the big eight.
The shifting hierarchy in the Australian legal market may also be attributed to these firms’ focus on expanding transactional and counter-cyclical practices – a strategy they have executed at a much faster pace than the big eight, according to Thomson Reuters.
“In FY 2025, this strategy continued to pay dividends to the large segment in terms of bringing in new business. The average large firm saw their transactional demand grow by 5.7 per cent, while their counter-cyclical practices grew by 7.6 per cent,” the report noted.
“The level of achievement becomes clearer when put in comparison to the big eight firms, which saw a 1.4 per cent growth and a 2.8 per cent contraction in these same categories, respectively.”
Despite this, the final quarter of FY25 highlighted the resilience of the big eight firms – the report noted that large firms slowed their momentum towards the end of the year, as the big eight “significantly” narrowed the PPEP growth gap.
In the final months of FY25, the big eight grew profits per equity partner by 3.9 per cent, compared to 5.7 per cent for large firms – and in the report’s foreword, Dean of Melbourne Law School, Professor Michelle Foster, said global instability in these months allowed the big eight to recover.
“The end of FY 2025 saw global instability such that firms worldwide, and indeed within our profession, were challenged, and shifting sands in the economy tested firms’ ability to endure and adapt. This assisted the big eight to regain their position and reclaim ground, especially in transactional practices,” she said.
More to come.
