International firms have seen demand shrink by 4.7 per cent, whilst domestic Australian firms have suffered a more modest one per cent decline over a year, according to a report by Melbourne Law School and Thompson Reuters. Despite this, a number of global firms have increased profitability by capturing a bigger share of high-margin transactions work, partner de-equitisation and reduced headcount. Firms such as Herbert Smith Freehills and Ashurst publicly reported increases in revenue as a result of their Australian operations, with Herbert’s profitability rising by 12 per cent over the 2015 financial year and 24 per cent over the last two years. Ashurst also increased its global revenue, reportedly up $6.23m on last year to a total of $1.156bn.

Downward trajectory 

The report pointed out that demand for commercial legal services has been on 'a relatively steady downward trajectory for the past five years, with 2015 failing to break this trend, with demand again falling two per cent.' It found that banking and finance work had decreased significantly, with the the largest firms seeing a decline of nine per cent. Corporate work was also down by five per cent across the board, but the largest firms bucked this trend, seeing a rise of nine per cent in corporate work. M&A was also up, with a two per cent rise across the year.