Citi Hildebrandt Client Advisory Reports Expected Strong End to 2025 and Optimism for 2026 for Law Firm Industry

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The Client Advisory covers the broad landscape for the legal industry, including how law firms are responding to market challenges and opportunities for growth in the year ahead.The results show that demand gained momentum throughout 2025, following unanticipated challenges early in the year. Revenue grew 11.3% driven by the collection of strong inventory entering the year and 1.9% demand growth.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.The collection cycle lengthened by 1.2%, revising the shortening previously reported in 2024. The report highlights that inventory was up 12.7% by the end of September, driven by 9.6% growth in accounts receivable and a 15.7% growth in unbilled time. These levels are a positive signal for strong fourth quarter collections.Based on the Report, New York remains the most important market for law firm expansion, with London firmly positioned second. While China and other parts of Western Europe remain more challenging markets, there was a noticeable shift in sentiment towards investing in the Middle East with several large firms anticipating growth in the region.Headcount grew 2.9%, driven by salaried lawyers. This investment in salaried lawyers was a prime factor in 9.1% expense growth at firms through the first nine months of 2025. There is also a continued shift to a more senior and expensive leverage model, with many law firms investing in more income partners. The results show a 6% growth of income partners. The investment in headcount has outpaced demand growth, resulting in a productivity decline of 0.6%. It is expected that firms will continue to shift to a more senior leverage model in 2026 and beyond.Results also indicated operating expense pressure which is expected to continue in 2026. There will be continued investment into technology, including cloud computing and cyber security with a greater focus on the impact and implementation of generative AI. Firms will also continue upskilling the professional staff leverage model. Firms are also poised to spend more on office space.Law firms maintain resilience and adaptability in volatile markets. In 2026, there is an anticipation for broader market consolidation, with the most profitable firms continuing to pursue a strong growth mindset, capturing a greater share of market. Generative AI and its impact and implementation on the industry at large will continue to be a strong focus.Analyses and projections are based on data collected from a sampling of primarily US-headquartered law firms by the Law Firm Group, as well as conversations with law firm leaders. Sources include the “Citi Annual Survey Database” of 200 US- and UK-headquartered law firms, including 43 Am Law 1-50 firms, 37 Am Law 51-100 firms, 55 Am Law Second Hundred firms, and 65 additional firms; 188 firms from the “Citi 9mo’24 Flash Survey,” including 42 Am Law 1-50 firms, 38 Am Law 51-100 firms, 54 Am Law Second Hundred firms and 54 additional firms; the “Citi Law Firm Leaders Survey” of 57 large firms headquartered in the US, UK, China and India; and the “Law Firm Leaders Confidence Index” which reports the forward-looking opinions of law firm leaders from 136 firms. Percentages used in the Figures may not add exactly to 100% due to rounding.This report is for informational purposes only based on those responses from the survey and are not intended to represent investment advice.The views expressed herein are those of the participants and do not necessarily reflect the views of Citigroup Inc., Citigroup Global Markets Inc., and its affiliates.The full Client Advisory can be accessed here.Citi is a preeminent banking partner for institutions with cross-border needs, a global leader in wealth management and a valued personal bank in its home market of the United States. Citi does business in more than 180 countries and jurisdictions, providing corporations, governments, investors, institutions and individuals with a broad range of financial products and services.Additional information may be found at www.citigroup.com | X: @Citi | LinkedIn: www.linkedin.com/company/citi | YouTube: www.youtube.com/citi | Facebook: www.facebook.com/citiAbout Hildebrandt Consulting Hildebrandt Consulting is continuing its long and distinguished history as the preeminent global consulting firm in the legal profession. With clients in over 15 countries, Hildebrandt has built up unmatched expertise in every aspect of professional firm management. Our reputation for helping firms arrive at strategic solutions comes from our knowledge of the interdependent elements that contribute to overall business performance. https://www.businesswire.com/news/home/20251211402428/en/ContactsAlex Phelan Greene, Global Public Affairs#distroPostmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information.