Byte of Prevention Blog

by Jay Reeves |

2023 State of the Legal Market Report

The forecast for the 2023 legal marketplace calls for continued clouds and scattered storms.

That prediction comes on the heels of a strong 2022 but with looming questions about sustainability.

In the latter part of 2022 and continuing into the new year, multiple challenges have emerged to threaten law firm profitability, including falling demand and productivity, rising expenses, changing client preferences, and economic turmoil,” says the Thomson Reuters 2023 Report on the State of the Legal Marketplace. “Indeed, one key metric — profits-per-equity partner (PPEP) — is down for the first time since 2009, which occurred during the last global financial crisis.”

The State of the Legal Marketplace is based on data from 170 large and mid-sized U.S. law firms. 

“Throughout 2022, growing political and economic uncertainty significantly reduced clients’ appetite for transactional work — which had become the white-hot driver of demand throughout 2021 and the early part of 2022,” the report says. “Indeed, possibly the most prominent development in the legal industry in 2022 was the substantial slowing in demand growth that firms experienced throughout the year.”

Read the 2023 Report on the State of the Legal Marketplace

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2023 Report on the State of the Legal Marketplace

Here are some key takeaways from the State of the Legal Marketplace Report:

  • In 2022, overall legal demand contracted by 0.1 percent, which stood in stark contrast to the 3.7 percent growth rate recorded in 2021.
  • The collapse in demand for transactional law services fell most heavily on larger law firms.
  • In 2022, law firms continued to add new lawyers at a healthy pace.
  • Productivity declined, while direct and overhead expenses remained high.
  • Midsize firms saw positive growth in 2022 – the only market segment with rising demand. This was attributed to clients’ desire to cut legal expenses while maintaining high-quality service.
  • “In times of uncertainty, organizations have a tendency to hunker down to protect against both real and imagined dangers,” the report noted. “To steer a firm successfully through such periods requires leaders to embrace somewhat different priorities and be willing to experiment with new ways of operating.” 

SOURCE: 2023 Report on the State of the Legal Market: Mixed results and growing uncertainty - Thomson Reuters Institute

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About the Author

Jay Reeves

Jay Reeves practiced law in North Carolina and South Carolina. He was Legal Editor at Lawyers Weekly and Risk Manager at Lawyers Mutual. He is the author of The Most Powerful Attorney in the World, a collection of short stories from a law life well-lived, which as the seasons pass becomes less about law and liability and more about loss, love, longing, laughter and life's lasting luminescence.

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