There are few things more steady and predictable than the ever-increasing number of practising lawyers.
Using NSW as an example, the increase was 4% between 2015 and 2016. Since then it has been close to 5% per annum. Is that sustainable? Is it adding to competitive pressures for jobs, for partnership openings and for practice owners?
First the gloomy facts. As the diagram below shows, annual economic growth in NSW over the past few years has mostly been in the range of 2% to 4%. During the property boom it popped out to 4.8%. If we use 3% for economic growth as an average over the past few years, it means that the number of practising lawyers is increasing at a 67% faster rate than the economy is growing. In the long run, that’s not going to result in a happy ending for lawyers. But this gloomy scenario couldn’t be further from the reality of the past 12 months.
The last 12 months has seen boom conditions for many areas of legal services. Even the property / conveyancing sector which boomed and busted is now on the way up again.
There are many areas of law that are counter-cyclical to the economy or not at all related to economic activity. Eventually, economics will prevail. You can’t have a booming legal sector when every other sector of the economy is suffering.
However, when you have a combination of factors such as multiple Royal Commissions, a wave of new regulations as well as opportunities arising from the application of technology to legal services, a 5% increase in the number of practising lawyers won’t be enough to keep up with the demand.
Where lawyers work
Where are an increasing proportion of lawyers working? The share of in-house corporate lawyers has not even moved by a quarter of a percent in the last 2.5 years. It is still 19%.
There has been an employment boom in large private practice firms and an increase in the number of small legal practices.
There is now also a shift of lawyers embedded in accounting practices. We recently learned that KPMG in Australia increased its lawyer head count from 30 lawyers early last year to 83 lawyers currently. Mid-tier accounting practices are also building their legal services capabilities. For example, Moore Stephens this month announced that it is actively building its legal services division.
This is how we can have both gloom and boom at the same time. There are always opportunities for lawyers to provide more targeted and more technologically-assisted legal services no matter what the economy is doing.