Productivity, Profitability Decline in 2022, While Expenses Outpace Revenue Growth
In Citi Global Wealth at Work Law Firm Group's survey of full-year 2022 financials, a clearer picture emerges of the impact economic shifts had on firms last year. The fourth quarter brought some tough news in some respects and softened the blow of other factors seen earlier in the year.
February 16, 2023 at 05:00 AM
7 minute read
Coming off the heels of the record performance seen in 2021, law firms experienced a very different year in 2022. Declining demand, a longer collection cycle and a drop in accrual realization drove modest average industry revenue growth. Meanwhile, the cost of operating law firms continued to rise, with expense growth outpacing revenue gains. As a result, profitability declined for the majority of law firms—a sharp contrast to the extraordinary results of 2021. That said, the past three years since the onset of the pandemic have been highly unusual and we believe that it's worth looking at average annual performance since the last of the more "normal" years—2019. On that measure, the law firm industry has reported very strong average annual performance over the course of these past three unusual years.
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