Thomson Reuters , a global content and technology company, issued a new report showing that law firms registered elevated revenue growth in the first quarter of 2024 and continued to heavily invest in technology. The Q1 2024 Thomson Reuters Law Firm Financial Index (LFFI), powered by Financial Insights, reported that law firms returned to a healthy financial state as demand was up 1.9% over the previous quarter.
In addition to the increase in demand, worked rate growth was at 6.4% in Q1, hitting the fastest Q1 pace of growth since the Great Financial Crisis.
Growth in demand was led by law firms’ litigation practices, which grew at 3.8%, showing one of the strongest increases outside of the post-pandemic upsurge even as other counter-cyclical practices faded slightly. Law firms still saw solid growth in bankruptcy, at 3.0%, and slow but steady performance in labor & employment of 1.0%. In addition, transactional practices appear to have stopped contracting, with corporate (all) growing 0.6%. This, in conjunction with the new set of rates, contributed to the strong revenue growth.
Law firms also reined in their expenses for the quarter as direct expenses grew 5.4%, a stark deceleration from double-digit growth just a few years ago. Even as firms’ spending on technology remained hot, overhead expenses continued to wane, notching a 5.5% increase.
In terms of real technology investment, or the growth in spending on technology minus inflation, law firms invested at their most rapid pace since 2014. The generative artificial intelligence (AI) evolution in the legal industry seems to be making an impact at least on firms’ expenses. And firms are effectively controlling costs in other areas to keep focusing on their technology investment.
“Law firms have positioned themselves well and are embracing the opportunities with generative AI; the pace of adoption will only continue to increase,” said Raghu Ramanathan, who joined Thomson Reuters earlier this year as president of Legal Professionals. “This technology will lead to efficiencies and increased productivity, enabling lawyers to deliver higher-quality work and provide even more valuable counsel to their clients. As firms work with their clients on a strategic approach to making the most of new technologies, both the client and firm will benefit.”
A copy of the Q1 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.