Law firms across the country are likely to be celebrating as their 2018 financial results come in, and the news may be even sweeter for those based in Pennsylvania and Delaware.
According to a year-end check-in survey conducted by Wells Fargo, firms based in Pennsylvania and Delaware experienced revenue growth of 6.5 percent from 2017 to 2018. That exceeds industrywide growth of 5.9 percent, said Joseph Mendola, senior director of sales with the Wells Fargo Private Bank Legal Specialty Group.
Net income, meanwhile, grew by 8.4 percent for firms based in the region, compared to overall industry growth of 7.6 percent. Profits per equity partner increased by 8 percent, nearly in line with the overall average of 8.1 percent.
Demand increased by 3.7 percent in Pennsylvania and Delaware, compared to 2.3 percent across the industry, Wells Fargo found. Still, Mendola said, inventory grew by 4.7 percent in the region, compared to 5 percent across the industry.
“It’s not like they reached their numbers by draining their inventory at the end of the year,” Mendola said.
Law firm lenders have been predicting since the middle of last year that 2018 would end up yielding better financial results than the legal industry has seen since before the Great Recession. The Wells Fargo data fell in line with that expectation, based on survey data from 150 law firms, most of which are in the Am Law 200.
In the Pennsylvania-Delaware region, 14 firms participated in the survey.
Those firms continue to be optimistic about 2019, Mendola said. They are projecting revenue growth of 4.5 percent, while the overall industry is expecting 4.4 percent revenue growth.
Pennsylvania and Delaware firms are also expecting demand growth of 2.3 percent and a standard rate increase of 5.3 percent in 2019, Wells Fargo found. Each of those expectations is slightly ahead of industrywide average projections.
“It seems like everybody is hitting on all cylinders. There’s growth in demand, there’s rate increases that seem to be sticking,” Mendola said.
Still, he said, factors remain that could temper that growth, including the ongoing Brexit developments in the U.K., a potential repeat government shutdown in the U.S., and the possibility of interest rate increases in the U.S. And while transactional business was strong in 2018, there was some slowdown in that work toward the end of the year, which may be why some firms hedged their forecasts, he said.
“There’s a lot of concerns and a lot of potential headwinds that the industry could be facing,” Mendola said. “The other thing that we’re concerned about is that if people start thinking about a recession it could become a little bit of a self-fulfilling prophecy.”
However, he said, 2019 will still likely be another positive year for the legal industry.