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25 May 2017

US companies dramatically outspend rest of world on legal costs

US organisations are spending dramatically more on legal services per every dollar of revenue than peers around the world - and the Chinese the least by a huge margin.


The average legal spend at US organisations is 0.40 per cent of revenues – 166 per cent higher than the 0.15 per cent average for the rest of the world. Canadians are the second biggest legal spenders accounting for  0.27 per cent of revenues, which is a more modest 17 per cent higher than the average for the rest of the world. Those who spend the least on legal services are the Chinese where legal spending is 87 per cent lower than the global average.

Opportunity for US companies to get better value

The findings come from a new study from Acritas Research. Lisa Hart Shepherd, its CEO, said there may be an opportunity for US companies to get more for their buck. ‘US organisations are operating in one of the most sophisticated, dynamic legal and regulatory frameworks in the world, so their demand for legal services is very high. Compared to the rest of the world, they pay higher rates and pay for much more of their advice by the hour, which may not incentivise efficient working.’ She added: ‘Our findings suggest that there is an opportunity for US organisations to get more value out of their spend and perhaps bring it closer in-line with global averages.’

Biggest spenders by industry

The industries which spend the most are real estate, banking and technology. The real estate industry spends three times more than the global average, while the banking and technology industries spend at rates that are 160 per cent and 95 per cent above average, respectively.

Better value for bigger companies

The bigger the company the more value is to be had. Companies with less than $500 million in revenue spend twice the legal average while firms with $6 billion or more in annual revenues spend a third of the average, the study found.‘When considering budgets, chief legal counsel should ignore global averages and benchmark themselves against their peers by industry, region and revenues to get a truer picture of whether they’re spending in line. Further, many would benefit from exploring whether the department can realise more value from its legal spend by considering different approaches to sourcing legal work,’ added Miss Shepherd.

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