Profit growth expectations of Australian law firms have reduced, with businesses pushing into non-legal services to meet evolving client demand, according to Commonwealth Bank survey.
According to the 2019 CommBank Legal Market Pulse report law firms’ confidence in business conditions has slipped.
In 2018, business confidence reached its highest point since the CommBank Legal Market Pulse began in 2010 following an uplift in client demand in areas such as disputes and regulatory compliance, and strong corporate deal activity.
This year’s report shows that firms’ confidence has eased from a net positive reading of 85 per cent in 2018 to 54 per cent in 2019, and the outlook looking forward two years has fallen to just 10 per cent.
The outlook for two years ahead is bleaker, CBA reported, having fallen to just 10 per cent.
Business confidence was high last year, CBA mused in a statement, “following an uplift in client demand in areas such as disputes and regulatory compliance, and strong corporate deal activity”. However, in 2019, profit growth expectations have “eroded”, and law firms are having to move into non-legal services in order to adapt to changing client demand.
“Despite conditions softening, confidence levels are still currently running above their five-year average and firms report healthy profit growth of 6.3 per cent in [financial year 2019], down from 8.2 per cent the prior financial year,” CBA wrote.
“This is flowing through to partner distributions, with firms reporting net 45 per cent of firms and reporting increases in profit per equity partner, down marginally from 49 per cent in 2018.”
CBA national manager of professional services Marc Totaro said: “As firms grapple with fluctuations in client demand, striking a balance between efficient service delivery and quality, sustainable client service has come into sharper focus.”