Big Law Heading Into 'Darker Skies' Amid Growing Costs, Lower Collections

Big Law firms are facing significant financial challenges as outlined in recent reports from August 2025, signaling “darker skies” for the industry. According to posts on X and Law.com, firms are grappling with rising costs and declining revenue collections, creating a precarious economic outlook. Key points include:

• Growing Costs: Firms are experiencing increased expenses, driven by factors such as higher associate salaries, with Milbank LLP’s recent summer bonuses (ranging from $6,000 to $25,000) setting a high bar that others may struggle to match. Additional pressures include investments in technology, office space, and compliance with new regulations, such as Trump-era tariffs, which elevate operational costs.
• Lower Collections: Revenue is under strain due to slower client payments and reduced demand for certain legal services, particularly in corporate and M&A sectors. An imbalance in hiring, with a surplus of litigation hires over M&A associates, has further strained profitability, as noted in a post by @MLAGlobal on August 7, 2025. This reflects a broader market shift, with clients delaying payments or seeking cost-effective alternatives.
• Economic and Political Context: The industry is navigating a turbulent landscape, with Trump administration policies, such as tariffs and immigration crackdowns, adding uncertainty. These factors, combined with inflation pressures (forecasted to hit 4% by September 2025, per Sky News), are squeezing firm margins. The dismissal of U.S. Copyright Office head Shira Perlmutter, linked to her AI-copyright report, also signals potential regulatory shifts impacting legal practices.
• Market Stratification: Observers note a growing divide among Big Law firms, with top-tier players like Milbank pulling ahead financially, while others face tighter budgets. The lateral market’s slowdown, particularly for corporate associates, reduces competitive pressure to match bonuses, as reported by Law.com. Firms may delay or condition bonuses until year-end, potentially tying them to billable hours or office attendance.

The combination of these factors suggests Big Law firms must adapt strategically, potentially by tightening budgets, diversifying practice areas, or leveraging technology to offset costs. The outlook remains challenging, with no immediate relief expected as economic and political uncertainties persist.