State of the US Legal Industry: As We Head into 2025, What Comes Next?

If you know one thing about me, it’s that I love to talk about the state of the legal industry. We may love to joke about lawyers’ reluctance to change, but truthfully, the industry is no stranger to evolution. And as we close 2024, a year marked by shifting economic priorities and political upheaval, the question on everyone’s minds is: What comes next?

With a new U.S. administration poised to reshape policies that impact both business and law, we can draw from the trends of 2024 and 2023 to anticipate where the legal market might head in 2025 and beyond.

The Rise of Counter-Cyclical Practices in a Post-Election Economy

We began the year with predictions from Thomson Reuters’ “Report on the State of the US Legal Market, ” which anticipated a notable shift in client priorities toward counter-cyclical practices such as litigation, bankruptcy, and labor & employment. This trend has been fueled by ongoing economic uncertainty and the need for legal support in crises and disputes.

However, by the end of the second quarter, Reuters was reporting signs of a potential transactional rebound , as deal activity began to pick up (anecdotally, I have heard this from several of my own law firms). While it’s too early to predict a sustained recovery, the data suggests that firms may need to remain agile, balancing the growth of counter-cyclical practices with a readiness to respond to renewed transactional opportunities. Thomson Reuters coins firms with these agile tendencies as “dynamic,” as opposed to “static” firms.

• 2025 Prediction: If economic instability persists, growth in litigation and regulatory work is likely to continue, particularly in areas like bankruptcy, labor disputes, and compliance. That said, a transactional resurgence could emerge if economic and market conditions stabilize. Firms should prepare to capitalize on both fronts by leveraging sector-specific expertise and maintaining flexibility in staffing and resources.

Generative AI: Hype vs. Reality

Generative AI dominated conversations in 2024, with firms cautiously optimistic about its transformative potential. You know how I feel about fancy new tools – start with where your goals are, develop your plan, and then identify what tools will help you meet your goals. If Generative AI is one of those tools, awesome. But don’t use it simply because it’s the cool new kid on the block. Equally, don’t ignore it because you enjoy being “old school.”

Automation promises efficiency gains – and in some cases, really delivers, but concerns about security, ethics, and adoption remain high.

• 2025 Prediction: We may see the “second wave” of AI implementation, where firms that strategically invested early reap measurable rewards. Those lagging behind will feel competitive pressure as AI increasingly differentiates firms’ ability to handle high-volume, low-complexity tasks. As we saw with social media helping to level the playing field, this may really level the playing field for mid-sized firms that were early adopters.

Client Expectations: The Value Proposition

Clients in 2024 signaled a clear preference for firms offering specialized expertise, responsiveness, and global reach—paired with cost-efficiency. That may sound like a sentence I could repeat every year from 2008 until now. But here are the key points, per Thomson Reuters:

Increasing rates have really been the underlying foundation of improved profitability for most law firms since the GFC, particularly because, as we’ve shown, demand growth has been relatively lackluster for most of that period.

Okay, that doesn’t seem so surprising. But…

Essentially, even as law firm rates have gone up aggressively, clients have found ways to reduce timekeeper costs. And we see that it doesn’t take much to reduce what clients are paying for outside legal counsel.

The good news, when you dig into the detail there, at least for my clients, is that the way that law firm clients are doing this is by shifting work from the AmLaw 100 to less expensive firms – I already know that I have great firms doing great work for less expensive rates (trade secret!). But, I digress. Here’s the prediction:

• 2025 Prediction: Firms will continue to face downward pressure on fees, even as operational costs rise. The firms that thrive will double down on sector-specific knowledge and innovation to offer demonstrable value. Expect an increase in fixed-fee arrangements and other alternative fee structures.

The Productivity Conundrum

Despite a decade-high increase in worked rates in 2024, productivity challenges persisted as headcount growth outpaced demand. This surprises absolutely no one.

• 2025 Prediction: To combat declining realization rates and address staffing imbalances, firms may invest more in workforce optimization—through targeted hiring, upskilling, and leveraging AI for administrative tasks. The pressure to “do more with less” will continue to shape operational strategies. I will add that firms will also be increasingly creative with what they offer their staff in terms of investment into their careers apart from upskilling – look for leadership and secondment opportunities at the mid-sized levels that larger firms can’t offer, increasingly hard-sell on the work/life balance, and more remote offerings.

The Big Picture: Geopolitics and Global Business

The results of the U.S. election are expected to ripple globally, influencing everything from trade policies to cross-border business activity.

• 2025 Prediction: Cross-border legal work may rebound as global business opportunities shift in response to new regulations and international trade dynamics. Additionally, although this sounds self-indulgent, it is simply relevant – firms with strong international networks will be well-positioned to capture this resurgence.

In conclusion, as the legal industry prepares to navigate 2025, adaptability will remain key. Firms that embrace technology, refine their value proposition, and focus on strategic growth areas will lead the charge in a post-election, globally connected market. While challenges persist, the opportunities to innovate and thrive have never been greater.