Law firm profits per equity partner fell nearly 4% last year as the cost of a hiring spree dampened an increase revenue, a Wells Fargo & Co. report found.
Hours billed per lawyer fell 6% to 1,568—the first time the figure fell below 1,600 in the 15 years Wells Fargo has been doing the report. Headcount grew 4.5% after firms hired to cope with a 2021 surge in work, the report said.
“We are concerned about the excess capacity in the industry,” Owen Burman, managing director of the bank’s legal specialty group, said in an interview. “We did see quite a few firms with very low productivity levels that are probably not sustainable.”
The productivity drop came in what otherwise was a good year for major law firms, with revenue growing 3%, Wells Fargo found. Hourly rates rose nearly 6%, according to the report, based on a survey of more than 140 law firms.
“Rate growth can only offset so many hours,” Burman said.
The results are in-line with expectations of a reset after a record-setting 2021 fueled by corporate practices that dried up for most of last year.
The 2021 corporate deal flow “was completely atypical and quite frankly unsustainable,” Winston & Strawn chairman Tom Fitzgerald said. “Last year was much more consistent. And to fill in that gap last year, litigation has had a marked increase across the board.”
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