Economic recession Photo: alphaspirit/Shutterstock.com

Seventy-six percent of chief legal officers believe a recession is coming in the next two years and that is impacting their overall budgets, according to the 2019 Chief Legal Officer Survey published by Altman Weil Inc. on Tuesday.

The author's report, James Wilber, a principal at Altman Weil, said in an interview that this was the first year the survey included a question about the recession. He said it is too early to be a part of a trend; however, the decrease in outside counsel spend and hiring is an indicator of an oncoming recession.

"The context of the 2019 survey, conducted in September and October 2019, includes a greater measure of economic uncertainty than in recent years, arising from the threat of a recession, unpredictable trade policy and a more volatile geopolitical environment," Wilber said in the report.

Forty percent of law departments increased their total budgets for 2019, according to the report. This number is down from the 53% of respondents who said their budgets increased in 2018. According to the report, 38% of law departments decreased overall spending. In 2018, only 29% of respondents decreased their overall spending.

Additionally, legal departments have "reversed course" on outside counsel spend from 2018 to 2019. In 2018, 42% of respondents indicated they increased spending on outside counsel. This year, only 27% of respondents said their legal departments increased outside counsel spending.

While outside counsel spend has decreased, 36% of respondents indicated they will increase the number of lawyers in the legal department in the next 12 months and 9% of respondents indicated their departments plan to make cuts. The report said the number of departments planning increases in their workforce has decreased from 42% in 2018.

"This pullback on law firm spending may reflect the results of doing more work in-house, the use of lower-priced firms or non-firm alternatives, renegotiated rate packages, or some combination of these and other cost-control efforts," Wilber said in the report.

Part of those cost-controlling efforts includes the implementation of legal operations. The number of legal departments that have hired a legal operations manager has gone up from 39% in 2018 to 46% in 2019.

"Having a legal operations manager has been an important and growing trend in the last five to six years," Wilber said. "If they're [legal departments] are looking at it is an investment that will save them money in the long run, if done right, it will happen."

Wilber said he would expect the number of respondents who hired legal operations professionals in the coming years to grow because legal operations is proving to be an effective cost-saving measure.

The survey was sent to 977 law departments in September and October with 238 in-house legal leaders responding to the survey.