Legal Departments Expect Busy 2022, With Law Firm Spending To Measure Up

  • Total spending on corporate legal services increased during the pandemic
  • Poll Shows Inside Executives Predict 7% Increase in External Consulting Spending Next Year

(Reuters) – Total spending on in-house legal departments has grown at a moderate pace since the start of the pandemic, according to a pair of recent surveys and interviews with experts who follow the industry, but high demand and rising rates could lead to increased spending for outside law firms next year.

“The number of cases for corporate counsel is at an all time high,” said Michael Rynowecer, president and founder of BTI Consulting Group.

The company, which conducted more than 240 telephone interviews with senior executives and in-house legal advisers earlier this year, found that total legal department spending increased by about 2% this year. For next year, BTI is forecasting a 5% increase in total spending, with spending on external advice rising from $ 71.2 billion to $ 76.2 billion, or 7%.

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This compares to a projected increase in spending of $ 40 billion to $ 40.7 billion for in-house legal staff and operations, continuing an upward trend in external consulting spending relative to internal spending, a declared BTI.

“They have this huge backlog to deal with, as well as a pretty significant increase in the current workload and ongoing business… and M&A activity is growing at record levels,” said Rynowecer. “So you add it all up, and you need law firms to be able to do it.”

However, even with growing demand, Lauren Chung, survey editor and managing director of HBR Consulting, said most legal departments have done a “good job” of managing costs, the average lawyer spend. external contracts being stable in 2020. But all the more so as law firms increase their invoicing. rate, she expects additional spending to be inevitable.

“The demand for legal services is increasing. It continues to increase,” Chung said. “Legal departments will need to invest more or allocate more budget to meet legal needs, either internally or with external counsel.”

Nearly half of internal executives at 160 companies responding to a survey by HBR Consulting’s legal department between April and October said they expected a “moderately increased” budget next year. The HBR report, released this week, said 84% of those polled expected increased demand for legal services related to contracts, data privacy, cybersecurity, regulatory matters and mergers and acquisitions.

“Legal executives anticipate an increased need for external advice next year due to regulatory uncertainty related to the pandemic,” said Ross Gardiner, vice president of legal and compliance practices at consulting firm Gartner. He added that internal departments are also experiencing more departures, which contributes to the increased need for external lawyers.

However, Gardiner said that over time, he expects spending on external advice to decrease proportionally as internal departments continue to invest in technology and focus more on distributing the workload. and internal growth.

To meet growing demand, Mark Yacano, managing director of recruiting firm Major, Lindsey & Africa, noted that legal departments have added “significant” staff in 2021, especially senior executives.

“It doesn’t look like the market is cooling off,” Yacano said. “I think you are going to see strong and strong growth in the legal department in the years to come.”

Read more:

Growth in demand for law firm labor peaked in 2021, report says

Growth of law firms accelerates, with the richest firms in the lead

Legal Department Operations Index focuses on spend, technology and management

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Xiumei Dong

Xiumei Dong covers legal industry news, with a focus on the strategy and growth of law firms, in-house legal counsel and the Washington, DC legal market. Contact her at [email protected]

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