The first half of FY 2025 has shown Australia’s law-firm sector further building revenue and profit growth on top of last year’s results. Fresh data from the Thomson Reuters Institute’s 2025 Australia: Mid-Year Legal Market Update report confirm that demand, billing rates and lawyer utilisation all remain firmly in positive territory, even after the surge of FY 2024. At the same time, warning lights are flashing as expense growth accelerates and demand becomes more concentrated in fewer practice areas and office locations.
This overview highlights information from the report, including the three core pressure-points shaping firm performance for the rest of FY 2025: revenue-line momentum, cost pressures, and shifts in practice-area demand.
Key Performance – H1 FY 2025 (vs FY 2024)
- Demand growth: +4.6 %
- Worked rates: +4.9 %
- Fees worked: +9.2 %
- Utilisation: +0.2 %
- Lawyer headcount: +4.7 %
Demand and Revenue: Growth on Growth
Australian firms ended FY 2024 with the fastest profit expansion seen since at least FY 2015, yet the latest figures show that fee earners are still adding billable hours and pushing worked rates higher. Total demand is up 4.6 % year-on-year, a remarkable outcome. Banking & Finance work leads the field at +10.5 %, followed by Workplace Relations at +6.9 %. Construction matters have grown +4.3 %, while Dispute Resolution clocks in at +3.0 %. Even with these tailwinds, some areas are slipping: M&A (-3 %), Insolvency & Restructuring (-1 %) and Real Estate (-0.3 %) have lost ground, highlighting an early trend toward concentrated demand drivers.
From a talent perspective, these mixed signals help explain why the headline numbers in our own 2025 Australian Lawyer Salary Guide show premium pay pressure persisting in high-growth practices, while mid-tier transactional teams see flatter increments. For firm leaders, matching resource allocation to the practices that continue to surge will be vital to protect margins.
Cost Pressures and Lawyer Utilisation
Revenue gains have so far outpaced cost inflation, but the Thomson Reuters data reveal that total expenses are climbing faster than headcount. Direct expenses — dominated by bonus pools — are running at about +9.7 %, outstripping indirect costs and pushing average per-lawyer outlay higher. If demand growth softens, these extra dollars will cut directly into margin.
For now, utilisation is holding the line. Lawyers across every seniority band are averaging roughly the same monthly hours they logged in FY 2024, adding vital leverage to the top line. Yet maintaining these load levels during rapid headcount expansion will require firms to keep morale and engagement high — two factors covered in our discussion on what makes law firms attractive to lawyers.
Shifting Practice-Area Demand
The table below shows where matter volumes are rising fastest and where they have begun to slip. Growth remains broad by international standards, yet a clear divide is emerging between financing-heavy practices and slower transactional work.
| Practice Area | YoY Demand Change |
|---|---|
| Banking & Finance | +10.5 % |
| Workplace Relations | +6.9 % |
| Construction | +4.3 % |
| Dispute Resolution | +3.0 % |
| Corporate General | +2.5 % |
| Real Estate | -0.3 % |
| Insolvency & Restructuring | -1.0 % |
| M&A | -3.0 % |
Banking & Finance work is buoyed by sustained infrastructure funding and refinancing activity, while Workplace Relations benefits from legislative change and a heightened union landscape. On the flip side, M&A and Restructuring teams are seeing fewer mandates, a trend also reflected in client caution around major deals.
Within Corporate General, increasing regulatory complexity is driving steady advisory work. For family-law practices, June 2025 reforms will reshape case strategies, as outlined in our review of upcoming family-law changes.
Conclusion
Half-way through FY 2025, Australian law firms remain on a profitable trajectory. Demand growth persists in key practices and worked rates are out-running cost inflation — for now. The next six months will test the sector’s ability to keep utilisation high, contain bonus creep and broaden its practice-area mix. Firms that align talent with the strongest demand pockets, manage costs proactively and stay close to client sentiment should finish FY 2025 on solid ground.
Disclaimer: This blog is intended as a general overview of the topic and should not be construed as professional legal or medical advice.
FAQs
- What practice area is growing fastest in 2025?
Banking & Finance, up 10.5 % year-on-year. - Why are expenses rising faster than headcount?
Larger bonus distributions and other direct costs are driving per-lawyer spend higher. - Has lawyer utilisation improved since FY 2024?
Yes. Average hours worked per month remain slightly above FY 2024 levels across all seniority bands. - Which practice areas are contracting?
M&A, Insolvency & Restructuring and Real Estate recorded modest negative growth in H1 FY 2025. - Where can I read the full Thomson Reuters report?
Follow the link in the Information Sources section below.
