New survey shows billing rates inching up slowly at US firms

US law firms increased their average firmwide billing rate by just 2.5% during the last year - one of the lowest increases in recent memory, reports The National Law Journal.

The small rise compares to a 4.3% increase in 2008 and a 7.7% rate climb in 2007.

The National Law Journal's annual survey of billing rates covered the period from 1 October 2008 to 30 September 2009, with 190 firms providing at least some billing information. Firms were asked to report their billing rates as well as their use of variations on the billable hour and alternative billing arrangements.

Nationwide, the average hourly billing rate for partners was $457 (£279) in 2009, up from $451 (£276) in 2008. For associates, the average rate was $287 (£175), an increase from $282 (£172) last year.

James Jones, a consultant with Hildebrandt International, said: "Law firms this year increased rates very modestly, compared to the standard rate increase of 6%-8%. I would have expected to see that, in 2009, when the message [about the state of the economy] finally sunk in."

Early indications are that billing rates will continue to creep up in 2010. A recent Altman Weil survey of 288 US firms revealed that firms anticipate an overall average rate increase of 3.2% next year. The American Lawyer recently surveyed 142 managing partners from the country's 200 largest firms, and 81% said they expect to raise billing rates in 2010. The majority of those firms - 77% - said that increase would amount to 5% or less.

Altman Weil consultant James Cotterman said that firms' inability to increase billing rates to the extent they have in years past is likely to depress 2009 financial results, as rate increases have been the single biggest factor in recent revenue and profit gains. The cost-cutting firms did during the past year will help mitigate the lower-than-typical rate hikes but is not likely to be enough to offset those losses, he said.

Susan Hackett, senior vice president and general counsel of the Association of Corporate Council, expressed surprise that any firm would boost rates right now. "I can tell you that whenever I talk to clients they actually laugh when they hear about firms raising rates in this environment."

Hackett added: "Every one of them should have been involved in some kind of cost-cutting or efficiency exercise, just like their clients, and the idea that the way to counter possible decreasing workloads or excess capacity is to raise prices is totally contrary to good business judgement."

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