A high bar set by the law firm industry's extraordinary performance in 2021 together with several current external macro factors have made the first half of 2022 challenging for law firms. An ongoing pandemic, the war in Ukraine, rolling lockdowns in China, inflation and equity and bond market volatility have all contributed to declining demand. This drop in demand and a longer collection cycle have in turn led to slower revenue growth. And with higher lawyer head count and a return to the office, expense growth has accelerated, outpacing revenue growth and causing margin pressure.

Looking ahead, we anticipate that expense growth will moderate. How much revenue growth accelerates and whether it is enough to reverse midyear margin pressure will rest largely on the practice mix of firms, the timing of a pick-up in transactional demand, and how much firms are able to collect by year end. For many firms, it is likely that profitability will decline from the exceptional levels seen in 2021.

These results are based on a sample of 197 firms (83 Am Law 100 firms, 52 Second Hundred firms and 62 niche/boutique firms). Forty-four of these firms fit our definition of either "international" (between 10 and 25% of lawyers based outside the United States), or "global" (at least 25% of lawyers based outside the United States). Firms with less than 10% of lawyers based outside the U.S. are classified as either "national" (less than 50% of total lawyers based in headquarter office) or "regional" (more than 50% of lawyers based in headquarter office). Citi Global Wealth at Work's Law Firm Group provides financial services to more than 900 law firms around the world and approximately 50,000 lawyers. Each quarter, the Law Firm Group confidentially surveys firms in the Am Law 100 and the Second Hundred, along with smaller firms. In addition, we conduct a more detailed annual survey and produce the Law Firm Leaders Confidence Index semiannually. These reports, together with extensive discussions with law firm leaders, provide a comprehensive overview of financial trends in the industry as well as forward-looking insight.