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Law firms will likely see a modest growth in profits in 2012, but other factors point to "a year of challenge and uncertainty," a new forecast suggests.
The 2012 Client Advisory, released Feb. 15 by the Hildebrandt Institute and Citi Private Bank's Law Firm Group, foresees soft demand and rising costs, Reuters reports. [Hildebrandt, like FindLaw, is a division of Thomson Reuters.]
"The revenue dynamics will likely not be as dire as 2009, but we have yet to see firms address the current pressure on expenses," the Citi Law Firm Group's chairman said in a statement.
Law firm profits are expected to grow modestly in 2012, but the demand for legal services may continue to decline, as it did in the last half of 2011, the Hildebrandt/Citi report found. Corporate and transactional practices seem to be getting hit the hardest, according to the report.
Consequences of this "uncertain" business climate are reflected in the receding ranks of law-firm associates. At top-tier firms, 73% of lawyers were associates in 2010, compared to 85% in 2001, according to the report.
Middle-tier firms saw a similar decline in associates, from 78% of mid-tier firms' lawyers in 2001 to 63% in 2010. That's had a serious adverse impact on young lawyers, who bore the brunt of layoffs in 2009 and 2010, the report states.
But the uncertainty and challenges also come with opportunities. A lagging legal market gives law firms a chance to explore lower-cost solutions like new business models and alternative fee arrangements, the report suggests. That could make law firms better prepared to face the future.