The boom in law firm partner hires seen over the previous year is set to subside in 2023 as the UK economy slides into recession, according to a new report.
The global economic downturn is set to hit law firm’s revenues, in a shift that is in turn set to cool the partner hiring market, the recruitment firm’s new report says.
This is set to see partner hires drop off sharply over the coming year, as fewer law firms look to poach top lawyers from their rivals.
The report from legal sector recruiter Edwards Gibson notes that 2022 saw a record surge in partner hires, as law firms sought to capitalise on the boom in demand for legal services that arose in the wake of the Covid-19 pandemic.
The surge in demand for legal services saw a near record 480 partner hires completed in 2022, compared to averages of 441 partner hires per annum over the past decade, the report said.
Edwards Gibson director Scott Gibson told City A.M. that a combination of lower costs and a boom in M&A activity led to a major uptick in law firms’ revenues during Covid.
He explained that a drop in travel, favourable real estate deals, and the UK’s furlough scheme all saved law firms money, as they capitalised on the boom in mergers and acquisitions.
“The post-covid economic bounce back, fuelled by ultra-loose monetary policies on both sides of the Atlantic, resulted in record law firm revenue and profitability, which in turn provided law firms with the largesse and confidence to invest in new partner hires,” the report says.
This surge is set to drop off over the coming year, however, as law firms deal with declining levels of work in the face of worsening economic conditions worldwide.
The report warns that higher interest rates may also dampen the litigation funding market as the private equity funds that back litigation funders begin to suffer.
“For many law firms, rising global interest rates may dampen that more than decade-long driver of Big Law – private equity,” the report says.
“If so, it will not just adversely impact transactional lawyers but also those many disputes lawyers who may not even realise just how much they have come to rely on private equity backed litigation funders,” the report added.