For the first time in nearly a decade, law firm leaders are feeling positive that the pressure on pricing will ease up, according to Citi Private Bank Law Firm Group.
On Thursday, the consultancy released its mid-year confidence survey. It asks law firm leaders to make projections about the second half of 2016 by answering a series of multiple choice questions about demand for services, hiring and other topics. Based on the answers, Citi calculates a 200-point numerical score for each topic, wherein 200 represents the highest possible confidence and optimism.
For instance, on realization rates, the survey assigned law firm leaders a 102 confidence score.
“At 102, it’s very close to 100, which would be neutral,” said David Altuna, a client advisor at Citi. “Although it’s very close to flat, there’s some projection that pricing pressure will abate.”
The score for realization — which Altuna used interchangeably with pricing pressure — has consistently measured under 100 since the third quarter of 2007, a point in time often picked as the beginning of the great recession.
He added, “I wouldn’t call it a reversal of the trend by any means, it’s more of a plateauing.”
Any score above 100 means there are more law firms leaders projecting realization rates will increase than there are projecting a decrease.
The somewhat wonky index is released twice per year. For the first time, this year, Citi opened the survey to law firm officers beyond managing partners, including chief financial officers and chief operating officers. Altuna said he did not believe the different roles accounted for any increased optimism, and said it mainly allowed for a wider sample size since more firms participated.
More than 150 law firms responded to the survey including 38 of the AmLaw 50 ranked by revenue, and more broadly, 111 of the AmLaw 200. In addition, 44 smaller firms participated in the survey.
Conducted in April, the survey also found law firm leadership expressed confidence in the U.S. economy, with a score of 111, but not the global economy, which received a score of 93. Altuna interpreted this latter score as concern about Brexit, the British vote to leave the EU.
There were of course other things happening in the economy in April: The Russian economy tumbled and global growth overall slowed.
On the bright side, law firm leadership expressed confidence across the board that hiring would pick up. Specifically, the survey found law firm leaders were most confident that hiring of associates, non-equity partners and staff attorneys, and lastly equity partners would pick up — with Citi assigning respective scores of 131, 123 and 117.
Law firm leaders also feel positive about demand for legal services, which received a score of 127.
“This is the number of billable hours,” said Altuna, noting that more survey respondents projected an increase than a decrease. “That’s a very positive sign for folks.”