A new report shows that nearly two in three Irish law firms recorded a decline in revenue over the last year.
Six out of ten firms cited maintaining profitability as a key challenge facing the sector over the next two to three years.
The report from accountancy and professional services firm Smith & Williamson - its ninth annual survey of law firms in Ireland - give insights into the sector's outlook and attitudes, performance and opportunities, talent and reward.
The study of the Irish legal sector was carried out by market research consultancy Amárach.
Smith & Williamson said that almost all firms surveyed identified the economy as the key issue facing the legal sector over the next three years.
Sentiment among firms has slumped with 80% seeing the outlook deteriorating for the sector over the last 12 months.
As well as the economic challenges posed to the country by Brexit, this year also saw a number of other unprecedented challenges emerge due to the Covid-19 pandemic.
94% of law firms said they believed Covid-19 had resulted in a negative outlook for the sector, while 56% of all respondents stated it was "significantly negative".
Staff numbers were also impacted over the last year, as just over one in three of all practices surveyed said they had decreased staff.
But 40% of respondents in the top 20 firms said they had increased staff numbers this year.
One in three practices said they had also reduced fee earner salaries, while 40% of the top 20 implemented salary reductions of 10% or more.
In an effort to protect jobs, seven out of ten firms said they were using the state-backed Temporary Wage Subsidy Scheme.
Today's survey reveals that two thirds of law firms said revenues had declined over the last year and one in three of all those surveyed recorded a decline of more than 20% over the last 12 months.
More than half also saw their profits decline this year, a dip of 10% on average among the top 20 firms and more than 20% elsewhere.
Law firms also said that business flows have inevitably been affected by Covid, with courts closed and adapting to remote working all having an impact on billing.
Firms with clients in exposed sectors also experienced an impact on the ability of some clients to pay. As a result, they have implemented pay cuts, reductions in partner drawings and distributions and reduced their overheads.
Paul Wyse, Smith & Williamson's Managing Director, Professional Services in Ireland, said that the Covid-19 pandemic has demonstrated the need for all organisations to be able to weather major unforeseen disruption.
Mr Wyse said the insights in this report reveal the challenges and opportunities for the legal sector at this unprecedented time.
"Legal firms have had to adapt and will need to develop their strategies further for the new era in the areas of business development, team culture and work flexibility while being increasingly diligent around lock-up, cash collection and maintaining profitability," he added.