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New research shows that Australian law firms have seen strong results in the first half of this financial year – but there are “signs of potential danger” looming.
Thomson Reuters has released its 2025 Australia: Midyear Legal Market Update report, which paints a positive industry outlook with Australian law firms successfully following what the company referred to as the nation’s “exceptional” results in the previous financial year.
So far in FY2024–25, Thomson Reuters wrote, the average firm Down Under has either seen a continuation of broad-based demand growth, elevated work rate growth, and improvements in utilisation despite massive headcount expansion, or at least have held onto the gains of last year.
In the first six months of the financial year, total billable hours increased by 4.6 per cent and worked rates increased by 4.9 per cent (with the number of hours worked per qualified fee earner holding steady at 0.2 per cent).
This has resulted, Thomson Reuters said, in a 9.2 per cent increase to fees worked in FY24–25 to date.
Moreover, three in four (73 per cent) of Australian legal buyers expect their total and international legal spend to increase or stay the same for the remainder of FY24–25.
Among the practice areas seeing elevated demand growth are banking and finance (10.5 per cent), workplace relations (6.9 per cent), construction (4.3 per cent), and dispute resolution (3 per cent).
Speaking to Lawyers Weekly, Thomson Reuters Institute’s senior manager of enterprise content – legal, William Josten (pictured), said that despite ongoing macroeconomic turbulence, the Australian legal services market continues to give positive indications for a “robust close” to the year.
“The combination of wide-based demand growth and elevated worked rates provides a strong foundation for success,” he said.
Moreover, Josten continued, the Australian market also has the benefit of being in the latter part of its financial year.
This is the time, he pointed out, when law firms “tend to increase their focus on cash collections, in turn boosting their profitability”.
This all said, Thomson Reuters noted that there are “signs of potential danger” on the horizon.
“Expense growth is accelerating, and there are increasing concerns around the sources of growth and anticipated spend by corporate clients over the next six months,” the company wrote.
Another challenge, the update continued, is the variety of demand sources that are diminishing.
For example, demand growth in M&A is down 3 per cent, while insolvency and restructuring (1 per cent) and real estate (0.3 per cent) are also declining.
“The region is seeing several areas of demand contractions, and growth is starting to be more concentrated within a smaller group of practices and office locations,” Thomson Reuters said.
“While overall demand growth is still very strong, especially when taking the previous year’s results into consideration, the sustainability of overall growth may be slightly less than it was last year.”
Jerome Doraisamy is the managing editor of Lawyers Weekly and HR Leader. He is also the author of The Wellness Doctrines book series, an admitted solicitor in New South Wales, and a board director of the Minds Count Foundation.
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Jerome Doraisamy
