Competition lawyers are in exceptional demand thanks to growth in merger and acquisition deals, while the ‘War for Talent’ and the ‘Great Resignation’ are putting unprecedented pressure on remuneration.
These are some of the key observations in a recent review of the Australian legal market for the financial year 2020/21 (FY 2021) by Thomson Reuters.
Here is a look at the most important takeaways from the Thomson Reuters report, along with our take on what is ahead for the legal market in 2022 and beyond.
Recapping the Australian legal market in FY 2021
The remarkable growth in demand for legal services seen during FY 2020 did not continue into FY 2021. With just 2.2% overall growth, FY 2021 was decidedly more lacklustre compared with the previous three years, which saw average 6.6% annual growth.
Dispute resolution had been the primary driver for demand growth, predominantly because of the Hayne Royal Commission into banking and an increase in class actions. With the commission closing out, slowing demands for disputes contributed to reduced growth in overall demand.
Regulatory workflows made a massive comeback with market-leading growth of 14.8%. This followed the aggressive approach taken by Australian regulators, including the Foreign Investment Review Board, in response to record-breaking M&A deal flows.
Partner movements are a great indicator of law firm strategy. Partner mobility recovered to near pre-pandemic levels in FY 2021, with 222 partners switching firms.
The employment and workplace safety area saw the most partner movement, reflecting the response by corporations to work-from-home procedures and COVID-related compliance.
Given this increase in activity, regulatory lawyers were expected to be in high demand.
The COVID pandemic contributed to a 3.5% reduction in expenditure in FY 2021 because of pre-emptive business measures taken in 2020, savings associated with staff working from home, and other pandemic factors.
Compensation for non-billing support staff also shrank as fewer people were needed, given the shift away from the office.
Indirect expenditure, which refers to anything that is not related to compensation or benefits, declined by 9.3%, with almost half of this reduction due to savings in office expenses.
Clients’ view of law firms
Thomson Reuters found that client satisfaction was closely correlated with efficiency, quality of advice, strong communication and business understanding. Efficiency was a far better sign of client satisfaction compared with value for money.
This suggests clients are increasingly appreciating and valuing traditional standout qualities of successful law firms, such as practical and pragmatic advice, quality work, commercial and strategic advice.
In other words, it is not all about the money. Law firms must provide efficient advice to satisfy clients.
EG Consulting’s outlook for the Australian legal market in 2022
The ‘War for Talent’ has combined with the ‘Great Resignation’ to push remuneration growth in the Australian legal market to unprecedented levels. Demand across most practice areas has returned to pre-pandemic levels.
Activity in the dispute resolution area is increasing in FY 2022, and we see a significant increase in demand for contentious lawyers among our clients.
Competition lawyers are in even higher demand. Whether international, top-tier or national, our clients are actively seeking competition lawyer at any stage of their career. This follows continued growth in mergers and acquisition deal flows through to the end of 2021, with record-breaking growth predicted in the year ahead.
With mergers and acquisitions on the rise, finance teams are struggling to keep up with an exceptional increase in workload. This has led to exceptional demand for banking and finance lawyers.Several tier-one firms will now consider applications from lawyers with less than two years’ professional experience, which is something we have not seen previously.
As we head into the final quarter of FY 2022, there is exceptional demand for legal practitioners in Australia. More is yet to come, which we will discuss in a later article.
Want to know more?
Our team at EG Consulting monitors trends in the Australian legal market closely. This enables us to provide honest and specific advice that meets our clients’ needs, culture, and technical requirements.
If you are interested in further market information, salary benchmarking or would like to discuss potential career paths, reach out to Thomas Eckardt and Kumara Mallikaaratchi.