Law firm revenue will take a hit and layoffs are likely on the horizon, as demand for certain legal work drops and clients take longer to pay bills as a result of the Coronavirus pandemic, industry consultants said.

Before the crisis, law firms had expected a “low single digit” revenue increase for 2020, but now revenue is expected to be “absolutely flat” or “lower single digit down” for the year, said Mehrnaz Vahid, the head of Citi Private Bank’s law firm group, which provides financial advice and services to law firms, in an interview with Reuters on Friday.

Firms “all expect collections to slow down, period,” Vahid said.

The rapid spread of the coronavirus, which can cause the sometimes fatal respiratory illness COVID-19, has in recent weeks forced courts, businesses and schools in the United States to shutter, with nearly one in three Americans now under orders to stay at home. There were 43,800 confirmed cases of the virus and 506 deaths in the U.S. as of Monday afternoon.

Corporate and litigation practice groups could be hit especially hard, as many mergers and acquisitions and other deal work gets put on hold, while litigators deal with court closures and trial delays nationwide, according to Vahid and Brad Hildebrandt of Hildebrandt Consulting.

Some corporate lawyers are being asked to work on restructuring or bankruptcy matters as those practice groups may see an unprecedented upswing in demand, as could employment lawyers, Vahid and Hildebrandt said.

But not everyone can be transitioned to new roles. Large firms are already considering layoffs, though they likely will not follow through with them until at least six weeks from now, when firms have a better sense of the financial impact of the pandemic, Vahid said.

Underperformers and those close to retirement age are the most likely to be impacted by layoffs, she said.

”There’s a lot of firms taking a hard look at these things,” Hildebrandt said in an interview on Thursday.

To be sure, it’s not clear how long the pandemic will last or how severe the economic fallout will be. Both Hildebrandt and Vahid said it is possible that firms rebound later this year, especially as the industry started 2020 off strong.

Nonetheless, many large law firms are already asking for additional lines of credit, though there’s no uptick in credit use, yet, Vahid said.

”[Firms] just want to make sure that they have the lending available to them, if they need it,” she said. “If the collections don’t come in on time.”

Related Articles

BRIEFS: Faltering Chinese Recovery Leaves Hong Kong Short of IPOs, But Hope Remains

by Sarah Wong |

Shaking off the COVID-19 shadow after three isolated years, Hong Kong is now gripped by a fresh challenge as subdued markets sap the appetite for fundraising activities. With weak global demands and domestic headwinds putting a dent in China's much-hyped reopening, Hong Kong's capital markets have been struggling to take off.

Raring To Go

by Sarah Wong |

Reopened borders, scrapped restrictions, and conciliatory policies have come as relief to PRC law firms in Hong Kong, with economic activities in Greater China expected to steadily pick up following a difficult pandemic period. While lawyers are wary of an uncertain regulatory landscape and moderate investor confidence, they are also banking on their unique positioning as a bridge between China and the rest of the world. 

Skin in the Game

by Sarah Wong |

The COVID-19 pandemic may have irreversibly upended workplace dynamics by relegating in-office work to an option for many employees, and law firms are not insulated from the evolving trend. Leaders share with ALB how they respond to this paradigm shift by nurturing an “ownership mentality” among the up-and-coming generation of talent and cultivating workplace allegiance in the post-pandemic era.