With law firm financial results for 2022 expected to pour in over the coming weeks, lawyers across the country will soon discover whether their firms have achieved anything like the stellar numbers seen in 2021—the year COVID restrictions lifted and markets rallied.
Early reports suggest that profit and revenue will remain strong into 2022. Among the first to post results were Osborne Clarke and Gateley, which both delivered improved double-digit growth.
Given how unusual 2021 was, achieving anything like those record figures in the last financial year would be a triumph for any firm. But partners agree on one thing: growth, while remaining strong, is cooling in 2022.
No ‘Records’ This Year
2021 was a blockbuster year for law firms everywhere. Countries started relaxing lockdown restrictions and reopening their borders, and the global economy bounced back spectacularly from the shock of the COVID-19 pandemic.
As deals, floats and expansions returned, law firms reaped the benefits, with many posting record profits and revenue. Besides soaring revenues, a Law.com International analysis found that average PEP rose 18.7%, up from 0.5% on the previous year—the biggest rise in 14 years. U.S. firms have also posted record gains so far this year.
However, partners expect 2022 results to reflect corporates returning to pre-pandemic levels of business, with normalising markets tempering deal appetites.
While a London corporate partner at an elite U.K. firm said they “expect across the board firms to be doing well”, other partners were more restrained.
A global finance chair at an international firm agreed that “last year was a knockout for most firms”, but will be a “tough bar to hit”.
Similarly, a managing partner at a Big Law firm indicated that U.K. law firm profits would likely flatline this year. Similarly anticipating a dip in profit growth, a U.K. projects partner added: “Maybe it won’t be a huge change from last years’ results, but I don’t expect to see ‘record’ in headlines this year.”
Despite being upbeat, a London disputes head at an international firm said they expect a 5% to 10% drop in profit and revenue growth for 2022.
Somaya Ouazzani at specialist legal partner search firm Mimoza Fleur, was more optimistic, suggesting that firms are “benefitting from the flurry of instructions coming in”.
She added: “I think all law firm management are remaining cautiously optimistic.”
A Russia Effect
The Ukraine war had several effects on international law firms, with most ceasing their operations in Russia and their ties to Putin.
While the many expect the war to dampen results, partners said the impact is unlikely to be felt in the 2021/22 financial year.
A European managing partner went as far as saying that they expected the financial shockwaves of the war to be “absorbed” by Q1 to Q3 next year.
The London disputes partner said: “Quite a few practices in London are negatively impacted by sanctions. The Russian market for transactional and disputes work was relatively significant in London and it’s no longer an available market.”
With reporting by Habiba Cullen-Jafar, Hannah Walker and Jack Womack.