Survey points to further changes in Scottish legal scene

Fee income is up, but further mergers are highly likely and some firms could yet find themselves insolvent, according to a new survey of the Scottish legal profession published today.

The survey of top 30 firms, carried out in January by accountancy firm BDO, found that 69% of those who responded had increased their fee income in the first half of the 2014-15 financial year, but 43% thought it likely that a further legal practice could go out of business in the next 12 months.

An increase in the pace of mergers among mid-tier Scottish legal practices is predicted by 86%, while 79% expect to see further cross-border deals with English firms. Two thirds of respondents said they had themselves been in merger talks, the main stumbling block usually being finding another firm with a suitable culture.

Over 90% reported headcount growth in the previous year – a quarter by more than 5% – compared with only 6% who said numbers had reduced; and 88% expected further growth in the coming year. However all respondents had "managed" partners out of their business in the past year, and 22% had demoted partners from equity to non-equity status.

Charles Barnett, professional services partner at BDO, commented: "This survey is considerably more optimistic and positive than our previous one in 2011. In the intervening time many firms have gone, but there is evidence that Scotland's law firms have taken affirmative action to ensure their firm will be around for many years."

He added that the sector was "in a healthier, more vibrant state than it has been for many years", and would continue to attact merger and acquisition interest from elsewhere.