
According to a spokesperson from Dechert, a law firm founded in the U.S., the company is cutting 5% of its global workforce due to decreased demand for legal services. The firm, which has 1,000 lawyers, will be laying off 55 lawyers and 43 business professionals, including staff in its London office.
As corporate deal-making hit a record high globally, numerous large law firms hired aggressively in 2021 and early 2022. However, many firms are now adjusting to the decline in demand for legal services, which has led to cuts across the industry.
Some companies have become less interested in deals and other legal work due to increasing interest rates, high inflation, and fears of a recession.
A report from Wells Fargo released last week stated that demand for legal services declined by 1.5%, and productivity among large U.S. law firms dropped 6% in the first quarter of 2023 compared to last year.
Dechert is the eighth law firm to publicly confirm lawyers, staff, and layoffs since last year. The other firms are Cooley, Davis Wright Tremaine, Goodwin Procter, Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, Perkins Coie, Shearman & Sterling, and Stroock & Stroock & Lavan.
According to The American Lawyer, Dechert's revenue dropped by 3.94% in 2022 to $1.288 billion compared to the previous year.
The top 100 U.S. law firms by revenue experienced an average revenue growth of 2.7% in 2022. However, profits per equity partner decreased by 3.7%, as reported by the magazine.
As demand for legal services has cooled, there are indications that firms are reaching a new equilibrium. According to a report from the Thomson Reuters Institute, there has been slower expense growth among large and midsize firms. There is an increase in demand for countercyclical practices like labor and employment and litigation.
The U.S. Bureau of Labor Statistics released preliminary seasonally adjusted data last week, which indicated that the legal services sector added 1,500 jobs in April. This includes lawyers, paralegals, and other legal professionals. In March, the industry had lost 1,900 jobs, according to BLS data.