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19 June 2020

US firms see spike in new matters but legal activity remains depressed, study finds

Clio research shows uptick in early June even as firms worry about longer-term impacts of Covid-19

By Ben Edwards

The Wall Street Bull

The Wall Street Bull: New York City is due to move into Phase 2 of lockdown on 22 June Shutterstock

US law firms have seen the biggest pick up in new matters since early March as a number of states begin to reopen their economies after shutting down to try and slow the spread of the coronavirus pandemic, according to new research from Clio.

New matters jumped 12 percentage points higher in the first week of June — still 14% below the baseline level recorded at the start of the year, but up from -26% in the last week of May. Even so, fee income remains depressed, with year-on-year billings falling 14% in April and 27% in May.

“While law firms have been able to rely on work in progress from legal matters opened prior to March, it is clear that the shortfall of new casework in March and April has now also had an impact on monthly billings,” the Vancouver-based practice management software specialists said. “While the upward trend in new casework may result in a similar bounceback in billing volumes, firms may need to take into consideration their clients’ ability to pay, as unemployment rates still remain high in the US.”

A quarter of law firms said they have already had to forfeit revenue due to their clients’ inability to pay their bills, while almost three-quarters of firms said they are concerned clients might not be able to afford their legal fees.

The research also shows that while there remains pent up consumer demand for legal services — about a quarter of law firm clients are anticipating needing imminent help with legal issues, with around a fifth of those cases likely to be related to Covid-19 — roughly half of respondents said they would put off seeking support until the uncertainty around the pandemic eases.

However, three-quarters of law firms expect the long-term impact of Covid-19 on their businesses to persist even after the pandemic ends, with the number of lawyers expecting the economy to make a quick recovery continuing to fall.

Clio said: “Fewer legal professionals expect the economy to bounce back in the next three months, and fewer expect the social impact of the pandemic to subside over the same timeframe.”

The research was based on aggregated and anonymised data from Clio’s legal tech apps and surveys of 783 US legal professionals and 1,055 US consumers.

A survey of GCs at global companies published this week by Morrison & Foerster found the number of companies rating the business impact of Covid-19 as severe dropping to 42% at the end of May, 10 percentage points lower than when the firm last ran the survey in March.

Meanwhile, in the UK a 4.7% decline in legal services revenue in April has compared favourably to a 20% slump for the economy as a whole.

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