Law firms are riding high as profits surged an impressive 11.2% in the third quarter of 2024, signaling a prosperous year for the industry. A recent report by the Thomson Reuters Institute’s Law Firm Financial Index revealed a solid combination of higher productivity, favorable billing rates, and controlled expenses, creating a landscape of sustainable growth across various legal sectors.
The financial snapshot provided by the index, which pulls data from 195 large and midsized law firms, shows a third-quarter score of 71—the second-highest in the index’s 15-year history. The highest, at 84, was recorded in 2021 during the post-pandemic IPO and M&A boom. Unlike the brief surge of 2021, however, the 2024 gains appear to be steadier, with demand rising across multiple practice areas. Litigation saw a notable 4% uptick, with growth in corporate law, real estate, labor, and employment sectors as well. Even bankruptcy demand climbed modestly, though intellectual property services dipped slightly.
According to William Josten of the Thomson Reuters Institute, the 11.2% increase in profitability paints “a rosy picture” for the legal market. Economic factors like inflation and labor market fluctuations, previously expected to impact firm performance, have not materialized as obstacles. Instead, economic steadiness and market growth continue to foster strong billing rates.
Looking ahead, anticipated regulatory changes and compliance demands following Donald Trump’s election win could keep the momentum rolling for law firms into 2025. Shifting policies in antitrust and energy practices, in particular, are expected to fuel further demand. While inflation appears to be stabilizing—possibly limiting the rate of billing increases—firms are poised to benefit from a dynamic period ahead, where advisory needs are likely to surge amid policy changes.
As 2024 closes out, law firms are well-positioned, with steady profitability and diverse practice growth creating a foundation for continued success into the new year.
