Salaries are predicted to rise just 1% over the next five years, citing a new report by IBISWorld.
While the report estimates industry revenue will grow about 1.9% between 2016 and 2021, the threat of new legal businesses will continue to plague firms, leaving revenue growth ‘sluggish’, the AFR reported.
The wage pool is predicted to increase from $10.5bn to $11.4bn but that would be spread over 8400 extra lawyers, the report said.
“Even more concerning for firms is the expectation of new entities opening up, stirring even greater competition,” IBISWorld senior industry analyst Tristan Williams told the AFR.
“There will be more smaller niche firms relying on new technology disrupting traditional firm operations with lower costs and increased service access.”
He said local clients would make the switch to mid-tier and specialist firms, believing that the top tier offering was too pricey. He predicted that the number of law firm partners would decrease over the next five years due to pricing pressures.
The report found bad news for grads and junior lawyers, Williams predicting that firms would reduce the number of graduates they hired, seeking to outsource more low-level work offshore.
Some sectors are predicted to grow in response to foreign investment and business growth: mergers and acquisitions and intellectual property, as biotechnology and pharmaceutical manufactures require patents.
Property could suffer as the demand declined due to tightened bank lending, the AFR reported.
But Williams predicted that major firms were still unlikely to move away from the billable hour or cut prices despite the competition.
“The fee structure is entrenched and will take a while to shift despite the increasing number of smaller or newer firms providing alternative billing that gives fast turnaround and certainty to clients,” he said.