Given the high likelihood of a recession, we expected that firms with a tilt toward down cycle practices would fare better than those who are heavily dependent on M&A and capital markets practices. This is indeed what we have seen so far this year.
Looking ahead to 2024, law firms face five key challenges. These are: achieving growth in a challenging macroeconomic and geopolitical environment; attracting, retaining and developing talent; navigating the challenges of a flexible work model; adapting to rapid developments in artificial intelligence; and managing cost inflation and pricing pressure.
Measured against the challenging year of 2022, demand for the first nine months of 2023 was down compared with the same period last year – with the decline moderating throughout the year.
While large cap M&A and capital markets practices remained challenged, there were a number of busy practices – litigation, regulatory and investigations, funds/investment management, bankruptcy and restructuring, and intellectual property.
Moving forward, we expect that large firms are particularly concerned with achieving growth in a volatile geopolitical climate and macroeconomic environment. That said, they continue to maintain a growth mindset – and firms plan to expand selectively.
When it comes to attracting and retaining partner talent, competition among firms to attract and retain the best is expected to continue.
In a post-pandemic world, changes to working patterns remain ongoing also; and we wouldn’t be surprised to see more firms adopt a four-day week. We believe that in-office time aids associates in their development, as they benefit a good deal from regular in-person interaction with senior associates and partners.
The rapid developments in AI in 2023 have also caused firms to focus on how they will adapt to generative AI in the coming years. We expect that firms will continue to focus on how best to leverage generative AI and technology in general to work more effectively. There will be two parts to this – (1) to improve business processes within the firm, and (2) to deliver legal services more efficiently.
And, given the expense pressure felt over the past two years, we expect that firms will continue to focus on ways they can manage the higher costs of running a law firm.
We are optimistic about 2024. We expect continued strong activity levels for the high-performing practices of 2023 and we are optimistic about transactional practices.