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INDUSTRY REPORT M6931
Legal Services in Australia
Law and order: Improved operating conditions have led to increased industry revenue
Victoria Baikie | February 2022
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Contents COVID-19 (Coronavirus) Impact Update.............................3
ABOUT THIS INDUSTRY..................................5
Industry Definition................................................................5 Major Players...................................................................... 5 Main Activities..................................................................... 5 Supply Chain.......................................................................6
INDUSTRY AT A GLANCE................................7
Executive Summary............................................................ 9
INDUSTRY PERFORMANCE..........................10
Key External Drivers.........................................................10 Current Performance........................................................11
INDUSTRY OUTLOOK....................................14
Outlook..............................................................................14 Industry Life Cycle.............................................................16
PRODUCTS & MARKETS...............................17
Supply Chain.....................................................................17 Products & Services..........................................................17 Demand Determinants...................................................... 19 Major Markets....................................................................19 Business Locations........................................................... 21
COMPETITIVE LANDSCAPE..........................23
Market Share Concentration............................................. 23 Key Success Factors........................................................23 Cost Structure Benchmarks............................................. 23 Basis of Competition......................................................... 25 Barriers to Entry............................................................... 26 Industry Globalization........................................................26
MAJOR COMPANIES......................................28
Other Companies.............................................................. 28
OPERATING CONDITIONS............................ 30
Capital Intensity.................................................................30 Technology & Systems......................................................31 Revenue Volatility..............................................................32 Regulation & Policy........................................................... 32 Industry Assistance........................................................... 33
KEY STATISTICS............................................ 35
Industry Data.....................................................................35 Annual Change..................................................................35 Key Ratios.........................................................................35
ADDITIONAL RESOURCES............................36
Additional Resources........................................................ 36 Industry Jargon..................................................................36 Glossary............................................................................ 36
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COVID-19 (Coronavirus) Impact Update
IBISWorld's analysts constantly monitor the industry impacts of current events in real-time ± here is an update of how this industry is likely to be impacted as a result of the global COVID-19 pandemic:
� The COVID-19 pandemic is expected to minimally affect the Legal Services industry's revenue. Consistent legal requirements for downstream clients limit revenue volatility from external economic events. Demand for legal services has been resilient compared with many other industries, with core offerings partially protecting industry operators. For more detail, please see the Current Performance chapter.
� Demand from property and financial markets is expected to decline over the past five years due to the pandemic significantly affecting these sectors. Volatile business conditions have discouraged business ventures, constraining demand for value-added services. For more detail, please see the Major Markets chapter.
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About IBISWorld IBISWorld specializes in industry research with coverage on thousands of global industries. Our comprehensive data and in-depth analysis help businesses of all types gain quick and actionable insights on industries around the world. Busy professionals can spend less time researching and preparing for meetings, and more time focused on making strategic business decisions that benefit you, your company and your clients. We offer research on industries in the US, Canada, Australia, New Zealand, Germany, the UK, Ireland, China and Mexico, as well as industries that are truly global in nature.
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About This Industry Industry Definition Industry firms primarily provide legal advice and representation and prepare legal documents. Solicitors, barristers
and legal aid offices typically provide these services. Alternative dispute resolution, conveyancing and intellectual property services are also included in the industry. The industry does not include services provided by in-house legal teams.
Major Players There are no major players in this industry
Main Activities The primary activities of this industry are:
Advocate services
Barrister services
Conveyancing services
Legal aid services
Notary services
Patent attorney services
Solicitor services
Public prosecutor services
Government solicitor services
Title-searching services
The major products and services in this industry are:
Commercial law services
Personal legal and industrial relations services
Property law services
Criminal law services
Intellectual property law services
Community legal services
Administrative, constitutional and other law services
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Supply Chain
SIMILAR INDUSTRIES
Custody, Trustee and Stock Exchange Services in Australia
Real Estate Services in Australia Accounting Services in Australia Management Consulting in Australia
RELATED INTERNATIONAL INDUSTRIES
Law Firms in the US Conveyancing Services in the US Immigration Lawyers & Attorneys Trademark & Patent Lawyers & Attorneys
Personal Injury Lawyers & Attorneys
Family Law & Divorce Lawyers & Attorneys
Online Legal Services Attorneys in China
Legal Activities in the UK Law Firms in Canada Legal Services in New Zealand Legal Activities in Ireland
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Industry at a Glance Key Statistics
$26.8bn Revenue
Annual Growth
2017±2022
2.9%
Annual Growth
2022±2027
2.5%
Annual Growth
2017±2027
$8.5bn Profit
Annual Growth
2017±2022
2.6%
Annual Growth
2017±2022
31.8% Profit Margin
Annual Growth
2017±2022
-0.4pp
Annual Growth
2017±2022
23,349 Businesses
Annual Growth
2017±2022
2.3%
Annual Growth
2022±2027
2.4%
Annual Growth
2017±2027
107k Employment
Annual Growth
2017±2022
2.7%
Annual Growth
2022±2027
2.1%
Annual Growth
2017±2027
$7.8bn Wages
Annual Growth
2017±2022
2.3%
Annual Growth
2022±2027
2.8%
Annual Growth
2017±2027
Key External Drivers % = 2017±22 Annual Growth
0.7% Number of housing transfers
12.8% Business confidence index
1.6% Number of divorces
-0.6% Level of criminal activity
-3.9% Demand from financial and insurance services
Industry Structure
POSITIVE IMPACT
Capital Intensity Low
Concentration Low
Industry Globalization Low / Increasing
MIXED IMPACT
Life Cycle Mature
Revenue Volatility Medium
Technology Change Medium
Barriers to Entry Medium / Steady
NEGATIVE IMPACT
Industry Assistance Low / Steady
Regulation & Policy Heavy / Steady
Competition High / Increasing
Key Trends
x Volatile business confidence has led to mixed demand for value-added legal services
x Traditional legal services firms have faced increasing competition from new online players
x Overseas players have expanded into the domestic market, which has increased enterprise numbers
x The number of housing transfers is forecast to increase, supporting industry growth
x Technological advancements are projected to alter the industry's operating landscape
x Employers are projected to require more highly skilled staff with a range of technical expertise
x Demand for the industry's value-added services has fallen due to mixed economic conditions
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Products & Services Segmentation
Major Players
There are no major players in this industry SWOT
STRENGTHS
Low Imports
High Profit vs. Sector Average
Low Customer Class Concentration
Low Product/Service Concentration
Low Capital Requirements
WEAKNESSES
Low & Steady Level of Assistance
High Competition
Low Revenue per Employee
OPPORTUNITIES
High Revenue Growth (2022-2027)
High Performance Drivers
Business confidence index
THREATS
Low Revenue Growth (2017-2022)
Number of housing transfers
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Executive Summary Law and order: Improved operating conditions have led to increased industry revenue
Operators in the Legal Services industry have faced mixed conditions over the past five years. Business confidence has been volatile over the period, prompting varied demand from downstream markets. Uncertain economic conditions have contributed to constrained demand for value-added services, such as legal work relating to merger and acquisitions activity, IPOs and restructuring initiatives, as downstream clients have sought to limit discretionary spending. However, improving conditions in the current year have supported growth in demand. In addition, constant legal requirements for downstream businesses have stabilised fluctuations in demand. Overall, industry revenue is expected to rise at an annualised 2.8% over the five years through 2021-22, to $26.8 billion. This trend includes an anticipated 2.5% increase in the current year, as operating conditions improve.
Increasing globalisation and changes to free trade agreements are projected to present opportunities for industry operators to expand over the next five years. Larger legal services firms will likely introduce more professional services that complement their legal work, including advisory services, over the period. Businesses looking to expand into or out of Australia may contract legal services to ensure compliance. Internationally focused firms are forecast to increase their revenue as their global client bases grow.
Industry revenue is forecast to continue growing over the next five years. Major disruption to the industry is unlikely, due to constant legal requirements for some industry services. Technological advancements, such as smart contracts and blockchain technology, are also projected to alter the industry's operating landscape over the next five years. For example, contracts will likely become increasingly digitalised and automated, saving time and reducing operating costs for industry players. In addition, legal documents are forecast to become more reliable, with new technology allowing documents to be easily traced and safely stored, reducing instances of loss or destruction. However, the market is forecast to become saturated as more external players start offering legal services, increasing price pressure and constraining revenue growth. Industry revenue is projected to grow at an annualised 2.5% over the five years through 2026-27, to $30.4 billion.
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Industry Performance
Key External Drivers
Demand from financial and insurance services
Finance and insurance companies require a range of legal services due to the technical services and products they offer and their involvement in complex transactions, such as mergers and acquisitions. Operators in these sectors also require legal advice relating to regulatory compliance, as government authorities heavily regulate financial and insurance services firms. Higher activity in the sector usually boosts demand for industry services. Demand from financial and insurance services is expected to increase in 2021-22, representing an opportunity for the industry to expand.
Number of housing transfers
The number of housing transfers represents changes in ownership for established houses and attached dwellings. People transferring property titles often require legal services to ensure the correct ownership structure. Declining housing transfer numbers therefore limit demand for legal services, representing a threat to industry revenue. The number of housing transfers is expected to rise in 2021-22.
Business confidence index
Business confidence reflects the current financial position and economic outlook of businesses in Australia. When businesses confidence is positive, firms are more likely to engage in activities that require legal services, such as new product development, merger and acquisitions activity and IPOs. The business confidence index is expected to rise and remain positive in 2021-22, supporting demand for industry services.
Level of criminal activity
Growth in criminal activity generally increases the number of people who need legal representation. Rising criminal activity also boosts criminal courts' workload. These trends contribute to rising industry revenue. Criminal activity is expected to increase in 2021-22, benefiting industry firms.
Number of divorces
Divorce processes tend to be complex, and often involve dividing matrimonial assets and custody of dependents. A rise in the number of divorces generally increases demand for law firms and practitioners that specialise in family law. The number of divorces is expected to increase in 2021-22. This can partly be attributed to the Marriage Equality Act that the government passed in late 2017, which legalised same-sex marriage and therefore increased the pool of total individuals eligible for marriage and divorce.
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Current Performance
Revenue for the Legal Services industry has increased over the past five years.
Nonetheless, fluctuating business conditions, increasingly price-sensitive clients and weak growth in household incomes have limited demand for legal services over the period. The COVID-19 pandemic has placed downward pressure on the industry's performance over the past five years. However, resilient demand for core industry services is anticipated to protect the industry from a severe downturn associated with the pandemic. Overall, industry revenue is anticipated to increase at an annualised 2.8% over the five years through 2021-22, to total $26.8 billion. This trend includes a 2.5% increase in the current year.
DOWNSTREAM DEMAND
Demand from downstream clients in more volatile sectors fluctuates based on economic conditions.
For example, the end of the commodities boom reduced demand for legal services relating to mining expansion activities. In addition, significant falls in dwelling commencements and limited foreign investment in property due to the COVID-19 pandemic have contributed to declining demand from property services. However, an overall rise in demand from the finance sector, which has been associated with the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services industry, has somewhat offset further declines in demand for industry services. Increasing regulation, such as legislation relating to financial services and the environment, has also supported the industry's performance over the past five years.
Over the past five years, volatile business confidence has led to mixed demand for the industry's value-added legal services, such as those relating to merger and acquisitions (M&A) activity and IPOs. Over the first half of the period, positive business confidence boosted demand for transactional industry services, which commonly attract high margins. Larger industry firms have also started providing clients with a full suite of professional services, covering all aspects of a project. However, uncertainty surrounding future economic conditions during the COVID-19 pandemic discouraged business activity that would drive up demand for these services. M&A activity declined significantly in 2019-20 across large firms, constraining industry revenue. Improving conditions in the two years through 2021-22 have helped to increase M&A activity, somewhat offsetting the decline associated with the pandemic. This trend has overall supported wage growth over the period, as industry operators require specialised employees with higher qualifications. However, wages have declined as a share of industry revenue due to stronger growth in revenue.
The industry's criminal law services have remained stable as a share of revenue over the past five years. Criminal activity has slightly declined over the past five years, partly due to lockdowns associated with the COVID-19
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pandemic, limiting demand for criminal law. However, the number of illicit drugs, weapons and explosives offences has increased. These cases tend to be more complex than other crimes, such as traffic violations, which has allowed some lawyers to charge higher fees.
GLOBALISATION AND RESTRUCTURE
Many large domestic industry players have expanded overseas in the past decade.
Many overseas law firms have opened offices in Australia to strengthen their position in the Asia-Pacific market. For example, US-based White & Case established its first Australian office in December 2016, and UK-based law firm Kennedys Law opened its second office in Australia in August 2017. This trend has contributed to growing establishment and employment numbers over the past five years. Major international companies, such as Herbert Smith Freehills, Allens, King & Wood Mallesons and Ashurst Australia, have further expanded into other overseas markets over the past five years. Increased globalisation has created revenue streams independent of domestic conditions. Although associated revenue from these global ventures is not included in the industry, large industry players are expected to benefit from their improving reputations.
Smaller firms, which make up most industry participants, have also benefited from larger firms expanding internationally over the past five years. As these firms have grown, smaller law firms have become more popular with cost-conscious companies, due to their lower rates and smaller clients' perception that they can provide them with more individualised attention. The number of industry enterprises has grown over the past five years, as small specialised players have entered the industry to service these clients.
INCREASING COMPETITION
Traditional legal services firms have faced increasing competition from new online players over the past five years.
Online firms, such as LegalVision, provide affordable online legal services to small businesses and individuals. Online firms have lower operating costs than traditional operators, and typically aim for quick turnaround times. Firms like LegalVision often provide fixed-fee services instead of the traditional billable hourly rate that most legal firms use. The fixed-fee model is more transparent, appealing to cost-conscious consumers.
Industry operators have also faced increased external competition over the past five years, as companies from outside the industry have expanded their capacity to provide legal services. Large accounting firms, such as KPMG, PricewaterhouseCoopers, Deloitte Touche Tohmatsu and Ernst & Young, have increasingly hired partners from law firms to increase their legal services offerings over the period. Accounting firms have pursued this strategy to expand their client base and provide greater value to existing clients. This trend has limited revenue growth over the past five years, as potential clients have increasingly employed accounting firms for high-value legal services. Government departments and private companies have been expanding their in-house legal teams over the period, contributing to declining industry profit margins over the past five years.
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Historical Performance Data
Year Revenue
($m) IVA
($m) Establishments
(Units) Enterprises
(Units) Employment
(Units) Exports
($m) Imports
($m) Wages
($m)
Domestic Demand
($m) 2012-13 20,681 14,456 19,466 18,924 87,780 N/A N/A 6,163 N/A 2013-14 21,158 15,636 20,030 19,483 86,539 N/A N/A 6,306 N/A 2014-15 21,724 15,554 20,405 19,863 86,087 N/A N/A 6,452 N/A 2015-16 22,606 14,378 20,892 20,352 88,344 N/A N/A 6,687 N/A 2016-17 23,329 14,767 21,450 20,878 93,985 N/A N/A 6,947 N/A 2017-18 24,725 15,156 21,936 21,378 99,063 N/A N/A 7,227 N/A 2018-19 25,895 17,712 22,395 21,812 103,237 N/A N/A 7,474 N/A 2019-20 25,115 16,551 22,861 22,314 102,109 N/A N/A 7,483 N/A 2020-21 26,205 16,928 23,422 22,845 104,106 N/A N/A 7,554 N/A 2021-22 26,847 16,726 23,956 23,349 107,413 N/A N/A 7,773 N/A
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Industry Outlook Outlook Industry revenue is forecast to continue growing over the next five years.
Continued recovery from the COVID-19 pandemic is likely to support growth for industry operators, especially demand for value-added services. In particular, demand from property operators and developers and banking, finance and insurance firms is forecast to grow strongly. Larger firms are projected to continue focusing on multi- disciplinary services, including advisory services, to compete for clients. Increasingly integrated legal and advisory services will likely protect larger industry operators from rising external competition, such as from major accounting firms. Stronger competition will mostly affect small firms offering commoditised services, such as due diligence reports and conveyancing services. Nevertheless, rising competition is projected to lead to moderate industry growth over the next five years. Industry revenue is forecast to rise at an annualised 2.5% over the five years through 2026-27, to $30.4 billion.
DOWNSTREAM DEMAND
Demand from the property market, one of the industry's major downstream markets, is forecast to increase over the next five years.
The number of housing transfers is projected to rise over the period, fuelling demand for property-related legal services. Mostly positive business confidence is forecast to increase demand from financial services and insurance companies, further boosting industry revenue. This trend will likely increase demand for high-margin legal work related to merger and acquisitions activity, and other expansion activities.
Law firms will likely continue introducing supplementary services over the next five years, to compete with large accounting firms that are expanding their legal services offerings. Firms are projected to expand through mergers and acquisition strategies, which would expand their capabilities and allow them to offer other services, such as consulting, in conjunction with traditional legal services. This trend is forecast to increase demand for industry firms from larger clients that require high-margin services. Consequently, industry profit margins are projected to increase over the period.
OPPORTUNITIES
Many Australian legal firms have expanded into overseas markets, particularly in the Asia-Pacific region, over the previous five-year period.
The government reviewing free trade agreements (FTAs) will give industry players opportunities to boost domestic and international over the next five years. FTAs give legal firms an opportunity to offer their clients a range of services in regard to intellectual property, advisory, environment, patents and risk. In 2019-20, FTAs with Hong Kong, Peru and Indonesia came into effect. In December 2021, the government signed another major FTA with the UK, which is anticipated to come into effect in 2022. As of January 2022, major FTA negotiations are ongoing with the European Union, India and the Gulf Cooperation Council. These FTAs present significant growth opportunities to Australian businesses, including operators in the Legal Services industry, as businesses would contract industry operators to ensure legal compliance.
Industrial relations reform could also be a significant growth opportunity for the industry over the next five years. In December 2020, the Federal Government introduced an industrial relations reform bill into parliament as part of its strategy to kickstart Australian economic growth. The reform stretches across five key areas, including award
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simplification, Greenfields agreements, casual employment, enterprise agreements and compliance and enforcement. Industrial relations reform is typically complex, resulting in many businesses requiring legal advice. As major industrial relations reform is rare, broad changes would be a significant opportunity to industry operators. The last large-scale industrial relations reforms in Australia occurred over a decade ago, with the Fair Work Act 2009 being the previous major policy change.
INDUSTRY STRUCTURE
Over the next five years, larger legal services firms are projected to focus on expanding their range of services to compete against accounting firms.
Industry firms will likely hire more highly skilled staff with expertise in a range of professional services, causing wage costs to rise as a share of industry revenue over the period. Increasing external competition from accounting firms will mostly threaten the larger industry firms. Smaller operators are projected to continue entering the industry over the next five years, contributing to an increase in enterprise numbers. Most of these new small enterprises are projected to primarily service niche markets, households and small businesses.
NEW TECHNOLOGY
Technological advancements, such as blockchain technology and smart contracts, are forecast to alter the industry's operating landscape over the next five years.
For example, contracts are projected to become more automated, reducing operating costs for industry players. In addition, these technological changes will likely decrease the cost and time clients spend to find representation. New technology will allow qualifications and payments to be verified online in real time, increasing trust between lawyers and clients without requiring face-to-face relationship management. Legal documents are also projected to become more reliable over the period, with blockchain technology allowing documents to be easily traced and safely stored, reducing instances of loss or destruction.
Performance Outlook Data
Year Revenue
($m) IVA
($m) Establishments
(Units) Enterprises
(Units) Employment
(Units) Exports
($m) Imports
($m) Wages
($m) Domestic
Demand ($m) 2021-22 26,847 16,726 23,956 23,349 107,413 N/A N/A 7,773 N/A 2022-23 27,539 17,680 24,426 23,813 108,919 N/A N/A 8,013 N/A 2023-24 27,906 18,418 24,837 24,216 110,472 N/A N/A 8,278 N/A 2024-25 28,855 18,755 25,566 24,932 111,754 N/A N/A 8,519 N/A 2025-26 29,844 19,339 26,123 25,470 113,700 N/A N/A 8,795 N/A 2026-27 30,375 19,592 26,916 26,242 119,049 N/A N/A 8,916 N/A 2027-28 31,174 20,263 27,586 26,897 121,674 N/A N/A 9,173 N/A
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Industry Life Cycle The life cycle stage of this industry is Mature LIFE CYCLE REASONS
Industry value added is growing faster than the overall economy
Firms have focused on improving operating efficiencies
The industry is in a merger and acquisitions phase
The Legal Services industry is in the mature stage of its economic life cycle, characterised by rising merger and acquisitions (M&A) activity, improved operating efficiencies and wholehearted market acceptance of the industry's core products and services. Industry value added, a measure of the industry's contribution to the overall economy, is projected to increase by an annualised 2.9% over the 10 years through 2026-27. This represents an overperformance in comparison with GDP, which is forecast to grow by an annualised 2.3% over the same period. As industry operators cater to a range of downstream markets, demand is likely to follow economic growth, which is indicative of a mature industry.
Due to high market saturation, the industry's largest players have increasingly undertaken M&A activities to broaden their range of services and capabilities over the past five years. This has helped firms differentiate themselves from other players and vie for market share. For example, in July 2017, Minter Ellison acquired technology consulting firm ITNewcom in a bid to expand through a multi-disciplinary approach.
In addition, legal services have wholehearted market acceptance, and little technological change is occurring in the industry. Technological change in the industry has largely involved increasing operating efficiencies. This includes adopting online databases and videoconferencing, which help firms streamline operations.
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Products & Markets Supply Chain Key Buying Industries
1st Tier
Telecommunications Services in Australia
Finance in Australia
Professional Services in Australia
Mining
Construction in Australia
Key Selling Industries 1st Tier
Legal Services in Australia
Accounting Services in Australia
Market Research and Statistical Services in Australia
Telecommunications Services in Australia
Office Property Operators in Australia
Products & Services
The Legal Services industry provides a variety of legal services.
Small law firms and sole proprietors tend to specialise in one service segment, as they do not have the scale to practice multiple areas of law. Alternative dispute resolution services are included in all service segments. These services offer a way to resolve disputes without involving the court.
COMMERCIAL LAW SERVICES
Operators in this segment provide legal advice to businesses, mostly relating to major corporate transactions such as mergers and acquisitions, IPOs, financing methods and taxation solutions.
The business cycle, investment trends and overall corporate activity heavily affect demand for these services. Due to commercial transactions' complexity, legal firms that specialise in this segment often command high premiums, representing a large portion of industry revenue. The top-tier law firms are the primary services providers in this segment. Some commercial law services, such as those associated with bankruptcy and restructuring initiatives, are counter-cyclical.
The COVID-19 pandemic has had a mixed influence on commercial law services. Demand for ongoing and core services has remained resilient amid the broader economic decline. The government provided support initiatives, such as JobKeeper, to downstream businesses during the COVID-19 pandemic. This support has limited demand for counter-cyclical services, such as bankruptcy, as it has kept these businesses afloat. Insolvency claims were below normal rates in 2019-20, during the peak of the pandemic. However, demand for bankruptcy and restructuring services are anticipated to rise sharply in the two years through 2021-22, as support packages are withdrawn and closed international borders continue to affect some sectors, resulting in ongoing economic weakness. Demand for transactional services, such as merger and acquisitions (M&A) activity and IPOs, are expected to fall sharply over the past three years. Unfavourable economic conditions and prolonged effects of the COVID-19 pandemic have discouraged M&A activity and other commercial business activities that require legal services. While improving conditions in the current year have supported increased activity, this is not expected to return to pre-pandemic levels. As a result, this segment has declined as a share of industry revenue over the five years through 2021-22.
PERSONAL LEGAL AND INDUSTRIAL RELATIONS SERVICES
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This service segment includes legal work related to wills and estates, personal injury, workers compensation and family law.
Sole proprietors and small firms are the primary providers of personal legal services, as services in this segment are less profitable than services in other segments. Since the government implemented the Fair Work Act 2009, employers have had to abide by regulations involving good faith bargaining, industrial action and permitted agreements. Legal firms provide services to both employers and employees. Legal services relating to industrial relations usually involve unions and large corporations.
Family law is also significant in this segment and involves matters concerning the family court, such as divorce, legal guardianship and child support. Family law predominately consists of alternative dispute resolution services rather than litigation due to the Family Law Act 1975, which requires individuals seeking parenting orders to attend compulsory family alternative dispute resolution sessions before taking the matter to court. Alternative dispute resolution services are expected to generate lower returns per case, but generally support the industry's performance as they are often mandatory.
The COVID-19 pandemic has contributed to an increase in worker compensation claims, partly due to people contracting COVID-19 through their workplaces, supporting demand for industry services. Issues relating to housing and employment are also expected to rise, further increasing demand for this segment's services. In addition, the number of divorces has risen over the past five years, increasing demand for legal services. As a result, this segment has increased as a share of industry revenue over the period.
PROPERTY LAW SERVICES
Property law services refer to property conveyancing and other property- related legal work.
Small local law firms primarily provide these services to households and businesses engaging in property transactions. As a result, interest rates and the domestic economy's strength significantly affect demand for property law services. Additionally, while property owners and investors account for a large portion of this segment's clients, property law specialists also advise property developers on issues such as structuring finance for property sales. Operators in this segment face strong and growing competition from real estate agents and mortgage brokers that can provide these services. The property market has struggled due to volatile business conditions and foreign investment, contributing to a decline in demand for this segment's services. However, improving conditions in the current year have limited this decline.
COMMUNITY LEGAL SERVICES
This segment includes legal aid authorities and community legal centres.
Eight legal aid authorities operate in Australia, with one in each state and territory. Legal aid provides funds that allow access to legal representation, while community legal centres often provide free legal advice and services. Almost 200 community legal centres operate throughout Australia, providing free legal services to the public with a focus on helping disadvantaged individuals. State and federal governments provide most of the funding for these services. These firms also derive a small proportion of funding from other sources, such as philanthropic organisations. Tenancy, employment and family law advisory services are anticipated to rise in response to the COVID-19 pandemic, and related law changes and moratoriums. In response, the Federal Government has increased funding to support those that the COVID-19 outbreak and the 2019-20 bushfires affected, boosting growth in this segment. As a result, this segment has increased as a share of industry revenue over the past five years.
INTELLECTUAL PROPERTY LAW SERVICES
Intellectual property refers to legal protection, such as patents, copyrights and trademarks, of valuable intangibles including ideas, inventions, words, trade secrets, discoveries and designs.
This segment consists of a range of clients across different industries. Clients include pharmaceutical and information technology companies, fashion houses and food and beverage manufacturers. Volatile business confidence has contributed to falling private expenditure on research and development, subsequently limiting the number of intellectual property cases that require legal services. As a result, this segment has slightly declined as a share of industry revenue over the past five years.
CRIMINAL LEGAL SERVICES
Barristers provide a higher proportion of the criminal law services
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segment compared with other legal professionals, as clients that require these services often need in-court representation.
An increase in illicit drugs, weapons and explosives offences has supported demand for criminal law services over the past five years. These cases are generally more complex than other crimes, such as traffic violations, allowing lawyers to charge higher fees. Therefore, this segment has increased as a share of industry revenue over the past five years. However, demand for criminal law services has slowed over the period due to weak growth in criminal activity. The COVID-19 pandemic is expected to further limit segment revenue. During lockdown periods, minor criminal offences, such as drink driving and street violence, have been falling. Nonetheless, domestic violence cases have risen significantly, modestly supporting demand over the same period.
ADMINISTRATIVE, CONSTITUTIONAL AND OTHER LAW SERVICES
This segment includes work related to government administration, the constitution, tribunals and other fields of law, such as environmental law.
Corporate clients dealing with government departments and agencies represent the main market for these services. Some larger industry firms also provide advisory services to government departments, agencies and statutory authorities regarding forming and implementing government regulations. This segment has increased as a share of industry revenue over the past five years, as activity among government departments has remained strong relative to the wider economy, particularly during the COVID-19 pandemic.
Demand Determinants
Demand for legal services is diverse due to the legal requirements for companies to operate across many sectors.
As such, demand for commercial legal services are largely influenced by general economic conditions and business confidence. For example, IPOs and mergers and acquisitions tend to occur more frequently in times of strong economic growth, resulting in greater demand for legal services in these areas. In contrast, during periods of economic downturn, legal services relating to restructure, insolvency and bankruptcy tend to increase. These countercyclical trends partly insulate the industry against sharp revenue declines during periods of economic downturn.
On the other hand, demand for other types of legal services, such as criminal and family law, tends to be less sensitive to economic conditions. Rather, these services are influenced by other factors, such as population growth, criminal activity and divorce rates. Additionally, changes in legislation typically result in increased demand for industry services, as businesses seek advice to ensure compliance with new laws.
Major Markets
Corporate and business clients account for the majority of the market for legal services.
Businesses across all industries typically use legal firms for matters such as contracts, transactions, protecting intellectual property rights, industrial relations and complying with legislation and regulatory requirements. Generally, the industry's largest players are commercially focused and tend to provide their services to other large entities. Small players, such as sole proprietors, are more likely to provide their services to small businesses or households, as they lack the necessary scope, skills and expertise to handle more complex cases.
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BANKING, FINANCE AND INSURANCE FIRMS
Banking, finance and insurance companies tend to offer technical products and are involved in a variety of complex transactions.
The finance and insurance sectors are also highly regulated, which drives demand for legal services related to regulatory compliance. Rising regulation and restructuring activity often require expert legal advice and have supported demand from this market over the past five years. However, falling merger and acquisitions activity due to volatile business conditions associated with the COVID-19 pandemic have contributed to an overall decline in this segment as a share of industry revenue over the period.
IT, COMMUNICATIONS, HEALTH, PHARMACEUTICAL AND BIOTECHNOLOGY FIRMS
Sectors that involve significant innovation in technology and products, such as IT, communications, health, pharmaceuticals and biotechnology, typically spend significant amounts on legal services to establish and protect their intellectual property rights.
In addition to establishing intellectual property rights, companies in this segment require legal services relating to IPOs, mergers and acquisitions. Growth in the activity from companies in this segment have increased over the past five years, supporting demand for industry services and contributing to this segment rising as a share of industry revenue over the same period. However, uncertain business conditions during the COVID-19 pandemic have limited merger and acquisition activity, reducing overall growth.
GOVERNMENTS AND REGULATORS
Government agencies and departments, and other regulatory authorities seek advice from law firms regarding creating and implementing regulations.
Government expenditure has increased strongly as share of GDP over the past five years, including a range of consumption and investment activity that require legal counsel. Public expenditure has increased as the government has aimed to stimulate the economy. As a result, government expenditure on legal services providers have increased as a share of revenue over the past five years.
ENERGY AND RESOURCES FIRMS
Energy and resource businesses generally require high value services from industry operators, such as legal work relating to infrastructure construction and development, capital raising and merger and acquisitions.
These issues encouraged legal firms to expand in the mining states of Queensland and Western Australia during the resources boom. Significant declines in mining capital investment over the past five years have limited the number of new mining sites to enter planning and development phases. This has constrained demand for industry services over the same period, contributing to this segment declining as a share of industry revenue.
HOUSEHOLDS
Households demand legal services for issues relating to property transactions, personal injury claims, criminal or civil charges, and in family matters such as divorce, custody, wills and estates.
Demand from this segment has been mixed over the past five years. Improved safety features and regulation of vehicles and workplaces have helped reduce personal injury claims. However, rising rates of divorce have supported growth in demand from this market. Overall, this market has increased as a share of industry revenue over the past five years.
PROPERTY OPERATORS AND DEVELOPERS
The industry derives a large portion of revenue from legal services
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provided to property operators and developers.
These legal services primarily ensure compliance with building regulations, resolve disputes between property owners, support the restructuring of finance and facilitate property sales. International border restrictions and weak economic conditions during the COVID-19 pandemic have weighed on foreign investment in property and dwelling commencements over the past three years, reducing demand for legal services. Slow growth in housing transfers over the same period have not been sufficient to offset the negative effects of the COVID-19 pandemic on the property market. Subsequently, this market has declined as a share of revenue over the past five years.
OTHER CLIENTS
Other clients include businesses across other sectors, such as manufacturing, agriculture and transport services.
These firms typically use legal advice for conveyancing and other corporate transactions. Other clients have remained largely stable as a share of revenue over the past five years, due to diversified demand minimising large fluctuations in demand.
Exports in this industry are Low and Steady
Imports in this industry are Low and Steady
International trade in the Legal Service industry is low and this trend has remained steady over the past five years. As the bulk of industry participants are sole proprietors and small firms, they often do not have the scale and scope to operate overseas. Hence, the industry primarily services the domestic market. However, large industry players are often involved in the provision of legal services to overseas markets. This generally occurs when clients engage in business with overseas firms, such as merger and acquisitions.
Business Locations
The geographic spread of businesses in the Legal Services industry is broadly in line with Australia's business activity and population distribution. This due to the provision of services to businesses and individuals across all sectors of the economy. As a
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result, the industry is heavily concentrated on the eastern seaboard, with New South Wales, Victoria and Queensland containing more than 80% of all industry enterprises.
New South Wales holds the largest proportion of industry enterprises in Australia. This is primarily due to the significant proportion of large businesses and financial institutions that are headquartered in Sydney. Legal firms are typically located in close proximity of their clients and the courts, as this makes facilitating client meetings and attending court sessions easier.
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Competitive Landscape Market Share Concentration
Concentration in this industry is Low
The Legal Services industry exhibits low concentration. The industry's four largest players are expected to account for less than 20% of industry revenue in the current year. The industry's low concentration is due to the large number of sole proprietors and partnerships, which account for over half of all industry enterprises. Generally, lawyers that have gained strong reputations service a specific portfolio of clientele and are self-employed. Additionally, approximately 98% of industry firms employ less than 20 people or are non-employing. These small and boutique firms typically provide legal services to small business and households. Larger legal firms in Australia tend to focus on commercial law and service large companies.
Key Success Factors
IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:
Having a good reputation: Firms with a good reputation for providing high-quality advice and services are more likely to obtain and retain clients.
Access to highly skilled workforce: Firms that employ highly skilled and knowledgeable staff are more likely to obtain good outcomes for clients, making them more competitive.
Provision of development programs for personnel: Legal firms that provide opportunities for employees to continue their education and expand their expertise are more likely to provide higher quality services, which helps to maintain clients.
Ability to effectively manage risk: Firms must ensure they have appropriate professional indemnity insurance to guarantee steady profitability.
Understanding government policies and their implications: Industry participants need to stay up-to-date with government policy to ensure their understanding of the law is current and sufficient to attain favourable outcomes for clients.
Access to niche markets: Legal firms that specialise in certain areas of law are better at providing high value-added services and can more easily differentiate themselves from competitors.
Cost Structure Benchmarks
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Profit
The Legal Services industry is highly profitable, as its services' value- added nature allows firms to charge high fees. Larger firms can generally charge clients higher fees than small operators, as they typically advise on more complex and lucrative corporate transactions. However, most industry participants are sole proprietors and partnerships. These non-employing enterprises tend to have lower wage expenses, as they typically draw their wages from profit. As a result, the industry's profit margins are overrepresented, while wage costs are underrepresented.
Industry profit margins have decreased over the past five years. Profitability has declined largely due to factors associated with the COVID-19 pandemic, such as volatile business confidence and only slight growth in discretionary incomes. These factors have constrained economic activity over the period, moderating demand for many of the industry's transactional services. Increasing competition, which has caused many small firms to lower prices to win clients, has also contributed to declining profit margins over the past five years.
Wages
Wages are the industry's largest cost due to the specialised knowledge and high education required to practise law. Legal professionals require extensive tertiary education in law, and also often undertake postgraduate studies. In addition, some employers may require specialised knowledge and experience in specific industries or areas of law. Legal practitioners must also have strong communication, negotiation and research skills to successfully represent clients and obtain the best outcomes. As a result, industry employees often command high wages.
Increasing competition among firms to obtain and retain valuable employees have placed upwards pressure on wage costs. The COVID-19 operating environment has also had a mixed effect on wages in revenue share terms over the past five years. Many larger firms implemented wage cuts and freezes due to expected decreased demand at the beginning of the pandemic. However, some of these cuts have overestimated the scale of the industry's decline. A large share of firms who implemented the cuts reversed them early on or provided bonuses to reward employees. Overall, wage costs have declined as a share of industry revenue over the past five years due to slower growth in wages compared with revenue.
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Rent
Rent costs include rent paid by law firms for office space and meeting spaces. Industry operators typically seek locations in or near central business districts to remain close to clients. While rent costs make up a small proportion of industry revenue, these costs have decreased in revenue share terms over the past five years. Many industry firms have downsized offices over the period, transitioning to remote and flexible working arrangements. The COVID-19 pandemic has exacerbated this trend, which has forced many employers in larger states to embrace working from home arrangements during lockdown periods. This trend has encouraged firms to downsize or reduce rental costs.
Other Costs
The industry incurs other costs, such as professional indemnity insurance, professional development courses, marketing, depreciation, utilities and travel expenses. Purchase costs are minor, as the industry's services are knowledge-based. Professional indemnity insurance is important for industry players, as it ensures that legal firms are covered in case of negligence or breach of professional duty. Depreciation costs are mostly limited to replacing administration tools, such as computers and management software. Other costs have increased as a share of revenue over the past five years.
Basis of Competition
Competition in this industry is High and the trend is Increasing
The Legal Services industry is characterised by high competition due to the fragmented nature of the industry and an increasingly price-conscious client base.
Industry firms generally compete on reputation, price and the types of legal advice they provide. Given the high specialisation and qualifications required for the provision of legal services, other businesses and industries generally cannot provide substitute services unless they employ qualified in-house personnel. External competition therefore primarily stems from accountancy firms, investment banks and major corporations with legal departments.
INTERNAL COMPETITION
Reputation is the major basis of competition in the industry.
Industry firms that gain a reputation for providing high quality legal advice, having extensive knowledge of a client's business and achieving the best outcome for clients tend to attract and retain clients. Additionally, highly reputable
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and prestigious firms can charge higher fees for their services and therefore generally benefit from larger profit margins.
Major law firms invest considerable resources in raising brand awareness and reputation through corporate sponsorship activities, pro bono work, and promoting ethical work standards and practices. Industry participants can provide high-quality services and achieve a good reputation by employing skilled and knowledgeable staff in both legal and administrative capacities. As a result, industry firms often compete against each other to attract and retain quality staff.
In addition, firms are increasingly competing on price, particularly for enterprises that offer low-margin work such as due diligence. Due to the commoditisation of an increasing number of industry services, firms have had to differentiate themselves based on timeliness of delivery and value for money. Firms have therefore been increasingly streamlining operations and increasing efficiency to maintain profitability.
EXTERNAL COMPETITION
While legal services have little external competition, other professional services firms, such as large accounting firms, are slowly encroaching on the services of legal firms.
These firms have increasingly focused on diversifying their revenue streams by offering legal services. These services typically cater to large corporate clients and therefore compete for the high-margin work traditionally done by larger globalised law firms.
Barriers to Entry
Barriers to Entry in this industry are Medium and the trend is Steady
Barriers to entry in the industry are moderate and are expected to have remained steady over the past five years. The main barrier to entry is usually attaining valid legal qualification. This generally includes having an accredited university degree, undertaking approved practical legal training, being admitted to the relevant legal admission board and holding a practising certificate.
The industry is highly saturated, with a large number of small practices. This results in intense competition among firms. Often incumbent firms have established reputations and a profile of clienteles. This factor may deter new entrants, as it may be difficult to compete against existing firms. However, the capital costs of entering the industry are relatively low, as the industry is labour-intensive. Course fees generally make up the largest overhead costs for industry participants. Other expenditure new participants are required to spend on include basic computer equipment, professional indemnity insurance and costs relating to setting up an office space.
Barriers to Entry Checklist
Competition High
Concentration Low
Life Cycle Stage Mature
Technology Change Medium
Regulation & Policy Heavy
Industry Assistance Low
Industry Globalization
Globalization in this industry is Low and the trend is Increasing
The Legal Services industry is characterised by low globalisation due to the large number of small local firms that only service the domestic market. However, globalisation has increased over the past five years, due to large industry players expanding their operations overseas through mergers and alliances. Additionally, modifications to existing free trade agreements have also increased globalisation. For example, a recent review of the Singapore- Australia Free Trade Agreement included provisions for greater recognition of both countries' professional qualifications. This improvement enables legal practitioners to operate with greater freedom in both countries and will promote cross-border trade along with greater corporate linkages.
High growth rates in the Asia-Pacific region have been creating new opportunities for law firms to expand their operations. To access this market, many overseas law firms have increased their links to Australian firms. For example, in December 2016, US-based White & Case established its first Australian office in Melbourne. Additionally, UK-based law firm, Kennedys Law opened their second office in Australia in August 2017.
Domestic firms have also tapped into other overseas markets over the past five years. However, this is often difficult for smaller firms and sole proprietors as laws differ significantly from country to country. Nevertheless, industry globalisation is anticipated to rise over the next five years, as agreements such as the China-Australia Free Trade Agreement expand the scope for Australian firms to work and share knowledge with Chinese firms.
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Major Companies There are no major players in this industry
Other Companies The Legal Services industry includes several well-known, major commercial law firms, also known as Australia's big six law firms. However, while the industry includes several well-established players, it is otherwise highly fragmented. Most of the industry is made up of small firms and sole proprietors that provide legal services to individuals and small to mid-size enterprises. These smaller players typically provide personal, property, criminal and community legal services.
Herbert Smith Freehills
Market Share: 4.0% Herbert Smith Freehills (HSF) is an Australian partnership that operates as an international law firm. HSF was
established in October 2012 after a full equity merger between UK-based law firm Herbert Smith and prominent Australian firm Freehills. The company is now co-headquartered in London and Sydney. HSF currently operates offices across Australia, Africa, the Americas, Asia, Europe and the Middle East. The firm has expertise across a variety of sectors, including agribusiness, financial institutions, energy, consumer products, infrastructure, manufacturing, mining, and pharmaceuticals and healthcare.
Allens
Market Share: 3.0% Allens is an international commercial law firm that largely operates in the Asia-Pacific region. An alliance between
Australian firm Allens Arthur Robinson and UK-based Linklaters formed Allens in 2012. Although the firms are integrated, they remain financially independent. The alliance is instead used to better establish joint ventures in Asia, enabling clients to access knowledge and expertise from both firms. Allens also has a long history of working with the Australian Government, and has been involved in several public sector projects. The firms' legal advice to government authorities generally relates to procedures and strategies for ensuring adherence to probity requirements and minimising commercial and financial risks.
Ashurst Australia
Market Share: 3.0% Ashurst Australia is the product of a merger between Australian firm Blake Dawson and UK firm Ashurst LLP.
Ashurst's decision to shift its focus from Europe to Asia and Blake Dawson's aspiration to be part of a global brand precipitated the merger. In early 2012, Blake Dawson started trading under the Ashurst brand and undertook a full financial merger in November 2013. The company has a global network of 26 offices across 16 countries in Asia, Australia, Europe, the Middle East and North America. The firm practices in various legal areas, including commercial arbitration and litigation, financial services, consumer products, intellectual property, utilities and transport.
Clayton Utz
Market Share: 3.0% Clayton Utz is an Australian-owned partnership headquartered in Sydney. The company is one of the last remaining
major firms to have offices solely in Australia, although it operates internationally through partnerships with overseas networks. Clayton Utz has offices in Brisbane, Canberra, Darwin, Melbourne, Perth and Sydney. The firm's client base largely consists of the top 100 Australian companies, along with federal and state government departments, agencies and organisations. The company has advised on several large public sector projects such as the Australian NBN network, Victoria's Level Crossing Removal project and Sydney's Metro Northwest project.
King & Wood Mallesons
Market Share: 3.0% King & Wood Mallesons was established in 2012 through the merger of China-based King & Wood PRC Lawyers
and Australian-based Mallesons Stephen Jaques. In 2013, the firm merged with UK-based SJ Berwin. The company operates under a Swiss Verein structure, which means that it is registered as three financially separate partnerships rather than one single legal entity. King & Wood Mallesons offers a range of services, relating to dispute resolution and litigation, intellectual property, restructuring and insolvency, and international funds.
Minter Ellison
Market Share: 3.0% Minter Ellison is an Australian multinational professional services firm. The company operates across Australia, New
Zealand, Asia, Africa, Europe and the Middle East. The company is one of the last large Australian firms that has not
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merged with a foreign company. Minter Ellison has diversified its revenue streams by expanding its non-legal consulting work over the past five years. The company has expanded in response to large accounting firms increasingly providing legal services and acquiring corporate clients.
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Operating Conditions
Capital Intensity
The level of capital intensity is Low
The Legal Services industry exhibits low capital intensity. For every dollar spent on wages, the industry is expected to invest $0.05 in capital in the current year. The industry is labour-, knowledge- and skills-intensive, with wages being the industry's primary expense. Lawyers require many support staff for research, filing, documenting and other duties. The industry's minimal capital expenditure includes communications and computer equipment, management software and legal database systems. Although these investments have improved employee productivity and helped streamline operations, they are unlikely to replace employees.
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Technology & Systems
Potential Disruptive Innovation: Factors Driving Threat of Change
Level Factor Disruptive Effect
Description
Medium Rate of Innovation
Potential A ranked measure for the number of patents assigned to an industry. A faster rate of new patent additions to the industry increases the likelihood of a disruptive innovation occurring.
Low Innovation Concentration
Unlikely A measure for the mix of patent classes assigned to the industry. A greater concentration of patents in one area increases the likelihood of technological disruption of incumbent operators.
Medium Ease of Entry Potential A qualitative measure of barriers to entry. Fewer barriers to entry increases the likelihood that new entrants can disrupt incumbents by putting new technologies to use.
Medium Rate of Entry Potential Annualized growth in the number of enterprises in the industry, ranked against all other industries. A greater intensity of companies entering an industry increases the pool of potential disruptors.
Very High Market Concentration
Very Likely A ranked measure of the largest core market for the industry. Concentrated core markets present a low-end market or new market entry point for disruptive technologies to capture market share.
The rate of new patent additions to the industry is low. This is combined with a low concentration of innovation. Both factors being low suggests that new technology entry is slow and widespread, which limits the threat of disruptive threats hurting leading industry operators.
Both the ease of entry and the rate of entry in the industry are moderate. While these factors do not significantly add to the threat of disruptive potential, they do not detract from it either.
The major markets for this industry are highly concentrated, which implies that the market has a focus on key customer segments. This presents an opportunity for strategic entrance into lower-end markets or unserved markets for innovations to take on a disruptive trajectory.
The Legal Services industry has faced limited technology disruption over the past decade, with changes largely relating to online databases.
However, technology disruption is anticipated to be high over the next five years. The industry is forecast to face changing operating conditions, with the onset of distributed ledger technology such as blockchain and smart contracts.
Blockchain technology will likely transform the industry's operations. In particular, industry contracts are anticipated to become more streamlined, efficient and secure. Blockchain technology will allow for smart contracts, a digital representation of the mutual agreements in a traditional contract. These contracts cannot be modified without the participating parties' permission, increasing the security of contracts. In addition, smart contracts can automatically execute orders once certain conditions are met. Blockchain technology will therefore likely create more efficiency and allow industry players to reduce transaction costs.
Automated legal services and remote consultation are also projected to become more common over the next five years. These technological changes are forecast to increase trust between lawyers and clients without the need for face-to-face relationship management. In addition, new technologies are projected to significantly reduce the cost of seeking a lawyer, increasing access to legal services for clients.
The level of technology change is Medium
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The Legal Services industry exhibits moderate technology change.
Technology development has been limited due to the high face-to-face contact needed, and the specialised service offerings provided. While there have been relatively minor changes in technology over the past five years compared with the rest of the economy, there have been some notable developments. This includes online databases and video conferencing, which link law firms to clients and other establishments. Additionally, for some major and extended trials, law firms have established systems that allow for the videoconferencing of external parties, together with electronic documents, evidence and real time transcripts. Courts also provide online retrieval of documents and access to information. This has allowed law firms to streamline their operations.
Revenue Volatility
The level of volatility is Medium
The Legal Services industry displays moderate revenue volatility.
Uncertain economic conditions and increasing competition among firms have caused some revenue volatility over the past five years. However, the industry is partially protected from revenue volatility due to its broad client base, which covers the majority of the economy. In addition, large firms are also able to leverage their range of expertise during economic downturns and take advantage of increased insolvency and restructuring work. Over the next five years, revenue volatility is expected to remain moderate.
Regulation & Policy
The level of regulation is Heavy and the trend is Steady
The Legal Services industry exhibits heavy regulation, and this trend has remained steady over the past five years.
While each state and territory have several organisations responsible for regulating legal practitioners in their jurisdictions, the Law Council of Australia is the main body representing the legal profession in Australia. Industry firms must abide by a variety of laws relating to registration and admittance to practise, professional conduct, fee restrictions and firm structure.
Industry participants are bound to the state and territory regulations of their jurisdiction, which has made it difficult for many players to operate inter-state. The industry has increasingly pursued standardising regulations affecting legal professionals over the past five years. For example, implementing the Legal Profession Uniform Law in Victoria and New South Wales in July 2015 boosted standardisation. This reform aims to create a common legal services market across New South Wales and Victoria, underpinned by a uniform regulatory system. Passing this legislation standardised continuing professional development requirements (which must be met each year for legal professionals to continue practising), billing arrangements and practising certificate requirements. However, day-to-day regulation will remain with independent state bodies. These reforms are expected to benefit larger legal services providers that operate across state borders, as they will streamline compliance requirements. However, the reforms are expected to have less effect for small firms and sole proprietors as they typically operate in only one state.
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FEE RESTRICTIONS
Statutory or other official fee scales govern fees charged for legal work.
In most cases, legal fees are negotiated between the lawyer and client. However, any person who is liable to pay a lawyer's fee can submit it to a court official for examination and the fee can be amended. The body responsible for setting fee restrictions varies in each state and territory. For example, the Law Society of New South Wales has the regulatory responsibility to ensure industry participants comply with the laws relating to costs. The society also assists in settling costs disputes and in investigating complaints. Regulations regarding costs are often complex and are regularly amended.
When setting fees, the board or law firm usually takes into account the complexity of the matter, the degree of difficulty and the time likely to be involved. The importance of the matter to the client, the specialised knowledge and responsibility involved, the number and importance of documents prepared or perused, and the value of assets involved also determine fees. Despite these fee restrictions, clients have increasingly demanded greater fee transparency over the past five years. Demand for transparency has led to some players, such as small online legal services provider LegalVision, to offer fixed- fee services rather than the traditional billable hour.
INCORPORATED LAW FIRMS
Incorporation enables firms to potentially list on the ASX.
Incorporation can provide advantages such as access to new sources of capital, the ability to attract a range of expertise to the board of directors, limited liability for key stakeholders and other financial advantages. Incorporation mainly benefits larger firms. However, incorporation can often trigger a significant capital gains tax liability along with the need to comply with company law and follow specific reporting obligations. As a result, many companies have decided not to pursue a limited liability structure through incorporation.
MODERN SLAVERY ACT 2018
In November 2018, the Federal Government passed the Modern Slavery Act 2018.
The act, which came into force on 1 January 2019, is a new reporting requirement for larger Australian businesses. Companies that generate annual consolidated revenue of at least $100.0 million have to report on how they act to mitigate the risks of modern slavery in their operations and supply chains. The NSW Government has also been considering its own state-based version of the report, which would require businesses with consolidated annual revenue of at least $50.0 million to report. The NSW Modern Slavery Act 2018 was due to come into force on 1 July 2019, but was delayed for further consultation on the day it was set to be implemented. The NSW Government has been attempting to introduce necessary amendments to the NSW Act to establish greater harmonisation with the Commonwealth's Modern Slavery Act 2018. The NSW Act commenced on 1 January 2022.
The act is expected to have a minimal effect on the Legal Services industry, as most players are small-scale operators or sole proprietors that do not generate sufficient revenue to file a compulsory report. However, firms can choose to do so if they wish. Additionally, the industry has a low exposure to international trade, limiting the likelihood of modern slavery being found in its supply chain. However, industry operators procuring goods and services from overseas must take action to ensure that modern slavery is not found in their supply chains. Reputation is vitally important to industry operators' success, and failure to comply with the act can have severe repercussions.
Industry Assistance
The level of industry assistance is Low and the trend is Steady
Assistance provided to the Legal Services industry is low and is expected to have remained steady over the past five years.
The industry does not receive direct assistance from Federal or state governments. However, the industry does benefit indirectly from government assistance to key downstream markets. For example, government grants and subsidies that encourage research and development for industries such as telecommunications, biotechnology, healthcare and utilities. Additionally, any change in government legislation often translates to increased demand for legal services, as companies employ law firms to ensure compliance. The government is also a major market for the industry's larger players.
The Legal Services industry also receives assistance from law societies and institutes, such as the Australian Bar Association and the Law Council of Australia. Each of Australia's state and territory also has their own law institute and bar association. These associations assist the industry through lobbying on issues of law reform, informing members of changes in the legal profession and act as a medium between the Legal Services industry and the wider community. In addition, these organisations offer members professional development programs and professional codes of conduct to ensure a high standard of work.
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Key Statistics Industry Data
Year Revenue
($m) IVA
($m) Establishments
(Units) Enterprises
(Units) Employment
(Units) Exports
($m) Imports
($m) Wages
($m) Domestic
Demand ($m) 2012-13 20,681 14,456 19,466 18,924 87,780 N/A N/A 6,163 N/A 2013-14 21,158 15,636 20,030 19,483 86,539 N/A N/A 6,306 N/A 2014-15 21,724 15,554 20,405 19,863 86,087 N/A N/A 6,452 N/A 2015-16 22,606 14,378 20,892 20,352 88,344 N/A N/A 6,687 N/A 2016-17 23,329 14,767 21,450 20,878 93,985 N/A N/A 6,947 N/A 2017-18 24,725 15,156 21,936 21,378 99,063 N/A N/A 7,227 N/A 2018-19 25,895 17,712 22,395 21,812 103,237 N/A N/A 7,474 N/A 2019-20 25,115 16,551 22,861 22,314 102,109 N/A N/A 7,483 N/A 2020-21 26,205 16,928 23,422 22,845 104,106 N/A N/A 7,554 N/A 2021-22 26,847 16,726 23,956 23,349 107,413 N/A N/A 7,773 N/A 2022-23 27,539 17,680 24,426 23,813 108,919 N/A N/A 8,013 N/A 2023-24 27,906 18,418 24,837 24,216 110,472 N/A N/A 8,278 N/A 2024-25 28,855 18,755 25,566 24,932 111,754 N/A N/A 8,519 N/A 2025-26 29,844 19,339 26,123 25,470 113,700 N/A N/A 8,795 N/A 2026-27 30,375 19,592 26,916 26,242 119,049 N/A N/A 8,916 N/A
Annual Change
Year Revenue
(%) IVA (%)
Establishments (%)
Enterprises (%)
Employment (%)
Exports (%)
Imports (%)
Wages (%)
Domestic Demand (%)
2012-13 5.86 4.22 -1.30 -0.17 -2.88 N/A N/A 2.80 N/A 2013-14 2.30 8.15 2.89 2.95 -1.42 N/A N/A 2.32 N/A 2014-15 2.67 -0.53 1.87 1.95 -0.53 N/A N/A 2.30 N/A 2015-16 4.06 -7.57 2.38 2.46 2.62 N/A N/A 3.64 N/A 2016-17 3.19 2.71 2.67 2.58 6.38 N/A N/A 3.88 N/A 2017-18 5.98 2.63 2.26 2.39 5.40 N/A N/A 4.03 N/A 2018-19 4.73 16.9 2.09 2.03 4.21 N/A N/A 3.41 N/A 2019-20 -3.02 -6.56 2.08 2.30 -1.10 N/A N/A 0.11 N/A 2020-21 4.33 2.28 2.45 2.37 1.95 N/A N/A 0.95 N/A 2021-22 2.45 -1.20 2.27 2.20 3.17 N/A N/A 2.90 N/A 2022-23 2.58 5.70 1.96 1.98 1.40 N/A N/A 3.07 N/A 2023-24 1.33 4.17 1.68 1.69 1.42 N/A N/A 3.31 N/A 2024-25 3.40 1.83 2.93 2.95 1.16 N/A N/A 2.90 N/A 2025-26 3.42 3.11 2.17 2.15 1.74 N/A N/A 3.23 N/A 2026-27 1.77 1.30 3.03 3.03 4.70 N/A N/A 1.37 N/A
Key Ratios
Year IVA/Revenue
(%)
Imports/ Demand
(%)
Exports/ Revenue
(%)
Revenue per Employee
($'000)
Wages/ Revenue
(%)
Employees per estab. (Units) Average Wage ($)
2012-13 69.9 N/A N/A 236 29.8 4.51 70,211 2013-14 73.9 N/A N/A 244 29.8 4.32 72,872 2014-15 71.6 N/A N/A 252 29.7 4.22 74,942 2015-16 63.6 N/A N/A 256 29.6 4.23 75,688 2016-17 63.3 N/A N/A 248 29.8 4.38 73,913 2017-18 61.3 N/A N/A 250 29.2 4.52 72,952 2018-19 68.4 N/A N/A 251 28.9 4.61 72,394 2019-20 65.9 N/A N/A 246 29.8 4.47 73,281 2020-21 64.6 N/A N/A 252 28.8 4.44 72,558 2021-22 62.3 N/A N/A 250 29.0 4.48 72,367 2022-23 64.2 N/A N/A 253 29.1 4.46 73,565 2023-24 66.0 N/A N/A 253 29.7 4.45 74,936 2024-25 65.0 N/A N/A 258 29.5 4.37 76,231 2025-26 64.8 N/A N/A 262 29.5 4.35 77,348 2026-27 64.5 N/A N/A 255 29.4 4.42 74,889
Figures are inflation adjusted to 2021-22
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Additional Resources Additional Resources
Lawyers Weekly http://www.lawyersweekly.com.au
Law Council of Australia http://www.lawcouncil.asn.au
Australian Bar Association http://www.austbar.asn.au
Industry Jargon BARRISTER A lawyer who specialises in representing clients in court.
CONVEYANCING Legal work relating to the transfer of ownership of real estate.
INCORPORATION The adoption of a corporate company structure. Law firms that incorporate do so to limit their liability and diversify potential sources of capital.
INTELLECTUAL PROPERTY Intangible property includes creations of the mind, over which owners may seek exclusive rights.
SOLICITOR A lawyer who represents clients in a wide range of legal matters, but who generally briefs barristers when complex advocacy work is required.
Glossary BARRIERS TO ENTRY High barriers to entry mean that new companies struggle to enter an industry, while low barriers mean it is easy for new companies to enter an industry.
CAPITAL INTENSITY Compares the amount of money spent on capital (plant, machinery and equipment) with that spent on labour. IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity. High capital intensity is more than $0.333 of capital to $1 of labour; medium is $0.125 to $0.333 of capital to $1 of labour; low is less than $0.125 of capital for every $1 of labour.
CONSTANT PRICES The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using the current year (i.e. year published) as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the 'real' growth or decline in industry metrics. The inflation adjustments in IBISWorld¶s reports are made using the Australian Bureau of Statistics' implicit GDP price deflator.
DOMESTIC DEMAND Spending on industry goods and services within Australia, regardless of their country of origin. It is derived by adding imports to industry revenue, and then subtracting exports.
EMPLOYMENT The number of permanent, part-time, temporary and casual employees, working proprietors, partners, managers and executives within the industry.
ENTERPRISE A division that is separately managed and keeps management accounts. Each enterprise consists of one or more establishments that are under common ownership or control.
ESTABLISHMENT The smallest type of accounting unit within an enterprise, an establishment is a single physical location where business is conducted or where services or industrial operations are performed. Multiple establishments under common control make up an enterprise.
EXPORTS Total value of industry goods and services sold by Australian companies to customers abroad.
IMPORTS Total value of industry goods and services brought in from foreign countries to be sold in Australia.
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INDUSTRY CONCENTRATION An indicator of the dominance of the top four players in an industry. Concentration is considered high if the top players account for more than 70% of industry revenue. Medium is 40% to 70% of industry revenue. Low is less than 40%.
INDUSTRY REVENUE The total sales of industry goods and services (exclusive of excise and sales tax); subsidies on production; all other operating income from outside the firm (such as commission income, repair and service income, and rent, leasing and hiring income); and capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets are excluded.
INDUSTRY VALUE ADDED (IVA) The market value of goods and services produced by the industry minus the cost of goods and services used in production. IVA is also described as the industry's contribution to GDP, or profit plus wages and depreciation.
INTERNATIONAL TRADE The level of international trade is determined by ratios of exports to revenue and imports to domestic demand. For exports/revenue: low is less than 5%; medium is 5% to 20%; and high is more than 20%. Imports/domestic demand: low is less than 5%; medium is 5% to 35%; and high is more than 35%.
LIFE CYCLE All industries go through periods of growth, maturity and decline. IBISWorld determines an industry's life cycle by considering its growth rate (measured by IVA) compared with GDP; the growth rate of the number of establishments; the amount of change the industry's products are undergoing; the rate of technological change; and the level of customer acceptance of industry products and services.
NONEMPLOYING ESTABLISHMENT Businesses with no paid employment or payroll, also known as nonemployers. These are mostly set up by self- employed individuals.
PROFIT IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company¶s profitability. It is calculated as revenue minus expenses, excluding interest and tax.
VOLATILITY The level of volatility is determined by averaging the absolute change in revenue in each of the past five years. Volatility levels: very high is more than ±20%; high volatility is ±10% to ±20%; moderate volatility is ±3% to ±10%; and low volatility is less than ±3%.
WAGES The gross total wages and salaries of all employees in the industry.
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