Pennsylvania and Delaware law firms appear to be keeping pace with promising industrywide trends in the first half of 2018, according to a new report.
Pennsylvania and Delaware firms showed revenue growth of 5.7 percent in the first half of 2018, compared to the same time last year, according to data from Wells Fargo Private Bank. And inventory—representing total accounts receivable and unpaid time—is up 8 percent in the region.
Rate increases and demand are driving the growth, said Joseph Mendola, senior director of sales with the Wells Fargo Private Bank law firm specialty group. And the inventory trend ”really has made us optimistic about how the full year will come in.”
Demand for the region was up 2.9 percent, Mendola said, showing a departure from historical flatness in recent years. That was right in line with national demand for the half. The average standard rate increase was up 3.8 percent in Pennsylvania and Delaware, which was slightly below the typical rate increases of 4 to 6 percent industrywide, Mendola said.
Lawyer head count grew 1 percent in the region, but equity partner tiers actually shrank by 1.1 percent, so leverage is “inching up,” Mendola said. And total productivity was up 1 percent for Pennsylvania and Delaware.
“With demand exceeding the growth in attorneys, for the first time in a very long time we saw growth in productivity per attorney,” he said.
About a dozen Pennsylvania- and Delaware-based firms participated in the Wells Fargo survey, Mendola said. Nationally, the survey of 125 law firms showed average revenue growth of 6 percent, inventory growth of 9.4 percent, rate increase of 4.7 percent and demand growth of 2.9 percent.
That shows a slight departure from a recent survey by Citi Private Bank, which showed Pennsylvania firms were, on average, ahead of the industrywide numbers in the first half of the year. But Mendola said the Wells Fargo survey results are still quite positive for the region.
“Business activity levels not only were strong toward the end of 2017 but remain strong through 2018, at least through midyear,” he said. “Six months does not make a year, but six months with good revenue and backlog does suggest that it will be a good year.”
Mendola said the current trends are driven by a strong economy, which is driving deal work and transactional activity.
“I would expect that type of business will slow as interest rates continue to climb,” he said. “I would hope that if the economy begins to soften a bit, some of the counter-cyclical practices will pick up the slack.”