Thomson Reuters NZ Law Report
The Thomson Reuters Institute has released its first State of the New Zealand Legal Market report, analyzing recent trends and providing market outlook for 2025. After five years of financial turbulence, New Zealand law firms have begun to stabilize their profit positions in 2024, according to the recently released report.
Market Performance
New Zealand law firms experienced exceptional growth in 2020-2021, with quarterly demand increasing 7.1 percent year-over-year, surpassing Australia, US, and UK markets. This boom was followed by a sharp decline, primarily in transactional practices, without the offsetting growth in counter-cyclical practices seen in other regions.
The 2024 recovery showed:
- Flat demand growth compared to 2023
- Worked rates increased by 6.4 percent, following a 7percent increase the previous year
- Direct expenses grew by only 3.0 percent
- Indirect expenses increased by just 1.6 percent
- Profits rose by 3.4 percent
- Profits per equity partner (PPEP) improved by 3.3 percent
Economic Context
The New Zealand economy is now stabilizing after significant volatility. Economic projections indicate:
- GDP growth expected to average around 2.3 percent in coming years
- Interest rates likely to settle between 2 percent and 3 percent
Performance Trajectory
The recovery in 2024 was not immediate. Law firms faced a broad downturn in Q1, followed by dramatic improvement in Q2/Q3, resulting in stronger profit positions by year-end. The consecutive years of strong rate growth demonstrate healthy pricing power among New Zealand firms.
Outlook
While the return to stability is promising for 2025, firms should remain cautious. The heavy reliance on transactional demand and exposure to macroeconomic factors could introduce future volatility. The improved demand metrics and effective cost management suggest a positive trajectory if current conditions persist.
