Thomson Reuters Q1 2026 LFFI: Strong Pricing, Slipping Productivity — Market Splitting by Scale

The Thomson Reuters Institute's Q1 2026 Law Firm Financial Index (LFFI) landed at 55 — exactly matching the historical average, masking dramatically divergent segment performance. Am Law 100 firms pushed worked rate growth to almost 10% (the largest firms exceeded 12%), while midsize firms decelerated to their first rate growth slowdown since 2021. Demand grew 2.7% — nearly triple the long-run average — but productivity slipped back into contraction after six months of gains, and overhead expenses climbed. The Iran conflict is dampening transactional M&A and counter-cyclical restructuring simultaneously. Midsize firm profit growth is running at roughly half the pace of Am Law peers, with expenses accelerating faster than revenue. The scale-driven competitive divide is becoming structural.