Demand and activity levels at the top end of the US legal services market have returned to their pre-pandemic levels leading to a series of 'eye popping' metrics, according to reasearch published this week.

The Thomson Reuters Peer Monitor Index, which measures demand, productivity, rates and expenses, reached its highest level on record during the second quarter, jumping 22 points to 84. 

Demand for legal services and productivity both increased by 7.3% between Q2 2020 and Q2 2021, spurred in large part by the ongoing boom in M&A activity. Compared to Q2 2019, the last second quarter pre-pandemic, demand for M&A work was up by 3.2% while general corporate demand 11.2% higher. Real estate, antitrust, tax, and labour and employment work were also among the other practices posting gains for the quarter. 

These figures need to be kept in context, the report noted, as the increases measured year-on-year are particularly eye-catching since last year’s Q2 activity levels were anything but ‘normal’. 

Paul Fischer, president of Thomson Reuters’ legal business, said despite lingering uncertainty, law firms are performing at high levels in the current conditions and “appear well positioned to withstand whatever lies ahead”. 

Mike Abbott, vice president of market insights and thought leadership at Thomson Reuters, added: "Firms and lawyers are leveraging strategic and operational flexibility, as well as innovative technologies, to meet the rapidly changing needs of their clients and position their firms for continued success through conditions that remain both fluid and challenging."

The report also noted that expenses remain an ‘area of curiosity’ for many firms, with spending beginning to show some signs of recovery: the rolling 12-month average for overhead expenses is -4.1% compared to the same period last year, up from the -8.5% in Q1. 

Overhead costs such as office expenses continued to decline in Q2 2021, even as many firms began to roll out their return-to-office plans. Investment in technology, however, rose 3.3% year-on-year. This growth was outpaced only by investment in knowledge management, which grew by 5.1%. 

The flood of M&A work has, however, impacted direct expenses, with many firms left scrambling to hire more associates, the resultant salary war leading to a quarter-over-quarter increase in expenses of 3%, which represents an increase of 6.8% from the second quarter of 2019.