American law firms have experienced their worst financial performance in 17 years as the effect of the global economic crisis hits the world’s biggest legal market.
The eagerly-awaited 2008 results show the true impact of the global slump in demand for legal services reports Legal Week.
The revenue for the top 100 US law firms was up 4.1 per cent to US$67b (AUD$80b), however profits per equity partner (PEP) fell 4.3 per cent to an average of US$1.26m (AUD$2.1m) while revenue per lawyer (RPL) fell 1.2 per cent to $818,000 (AUD$1m).
Despite the growth, the results signal the end of a five-year run in which US law firms had regularly achieved double-digit percentage growth in profits and fee income.
Profitability suffered as firms failed to scale back staff growth, New York firms were among the worst hit, with Cravath Swaine & Moore and Wachtell Lipton Rosen & Katz seeing dramatic falls in profitability.
Eight top 100 firms saw double-digit percentage falls in RPL, with a total of 22 firms reporting falls in revenue, including Latham & Watkins, O’Melveny & Myers and Shearman & Sterling.
Many senior lawyers believe the US legal market is set to see a fall in overall revenue in 2009, however, some US lawyers believe that the worst of the downturn has already passed, citing a recent upturn in finance work and a steady stream of bankruptcy instructions.
The 2008 results in the US looks to be more upbeat than equivalent results in the UK, where many major firms are expecting to see falls in revenue in their 2008-09 figures.