Scottish Legal Review: Upward progress in solid year

The last year might best be characterised as 12 months of solid progress for the legal profession in Scotland. Growth has been steady following a fairly flat 2017 '“ and Brexit, perhaps surprisingly, has not had the direct impact on business that we might have expected this time last year.

Shepherd and Wedderburn

Despite the enormous hoo-hah of the introduction of the General Data Protection Regulation (GDPR) in May, it has largely been a year of legal firms and their clients ‘getting on with it’, without any of the big mergers seen in 2017.

Last year, Dentons moved into Scotland by ‘formalising its combination’ with Maclay, Murray & Spens at the end of October, following the June 2017 merger of HBJ and Addelshaw Goddard.

The previous air of wistful sorrow over the disappearance of such well-kent Scottish legal names (following the earlier assimilation of McGrigors into Pinsent Masons, then Dundas & Wilson into CMS) seems to have largely passed.

Interestingly, however, Shepherd & Wedderburn made a big deal of its history by choosing a specific day in June to announce revenues were up 6 per cent to £53.5 million – the 150th anniversary of the founding of the firm that became Shep Wedd.

The numbers for Scotland’s two largest independent firms are also good, despite a year of change at the top as long-standing, high-profile legal leaders stepped down.

At Brodies, Nick Scott became managing partner as Bill Drummond retired after 20 years in the top job. Brodies, now with a 645-strong headcount and 97 partners, saw revenues grow to £68.59 million from £66.68m in 2016-17) and announced plans to move its two Edinburgh offices to one location, at the under-construction Capital Square near the EICC, in summer 2020.

At Burness Paull, now with 317 lawyers and 67 partners, there was a double change as Philip Rodney and Ian Wattie stepped down after a decade as chairman and managing partner, to be replaced by Peter Lawson and Tamar Tammes. The planned transition was accompanied by revenues going up 7 per cent to £57.6m.

Tammes says: “The disappearance of leading independents [like HBJ and MMS] was absolutely massive and we are always asked ‘What next?’” Lawson adds: “I always saw a positive message from these takeovers – that Scottish lawyers are very good and well-trained. On one hand, these are takeovers, on another it’s about firms from the outside coming in to enhance their offering.”

Lawson was at the International Bar Association conference in Rome last month and says there is a positive interest in, and knowledge of, Scotland: “Brand Scotland is incredibly strong globally. There is a fundamental trust in all things Scottish.”

Global connections are central to the continued growth of the Scottish independents, with Lawson stressing the opportunities to “help clients in a wide range of different jurisdictions by building relationships with the very best legal firms in those countries.”

At the same time, he says, Burness Paull is clear that Scotland remains the base to serve those clients and make those connections.

Brodies’ Nick Scott makes a similar point as he describes doing justice to Bill Drummond’s legacy: “We will continue the rigid focus on strategy, which was Bill’s hallmark, maintaining our independence in terms of no external control and making our own decisions – and keeping the focus very much on the Scottish market.”

Alison Atack, president of the Law Society of Scotland, is optimistic about the top-end market’s strength. She says: “Scotland’s largest firms are healthy and we are not expecting to see many, if any, mergers in the coming months. We continue to see English firms expanding their Scottish presence with two recent new office acquisitions, Burges Salmon opening an office in Edinburgh and TLT taking over Glasgow firm Leslie Wolfson & Co, which suggests little merger talks taking place. Many Scottish independent firms have strong referral links with English firms and that is adding to the stability of the sector.”

Allan Wernham, managing director (Scotland) at CMS, feels these announcements are “a strong indicator both of the confidence in the growth potential in the market and in the quality of the talent pool in Scotland, reflecting client demand for their law firms to deliver services to meet “ever-more complex needs, with international reach and deep sector expertise.”    

Looking at the wider profession, Atack says: “The Scottish legal sector is in pretty robust health overall which is encouraging, particularly in the property section. Our annual independent Financial Benchmarking Survey shows positive indicators.

“From the firms taking part, we can see a marked improvement in the profits per partner in larger firms.

“The survey shows two-to-four partner firms are performing well, although it would seem their slightly larger competitors, while also performing well, are not necessarily benefitting as much as expected from economies of scale.”

The big firms report good performance in all sectors, with Nick Scott at Brodies saying “all areas are trading up”. The bounce-back in the oil price has helped a limited recovery in Aberdeen, while Scotland’s tourism power has driven many hotel transactions. Food and drink remains strong, as does financial services, with lots of activity in fintech and wider technology.

Brexit might have had limited impact thus far, but as 2019 draws ever nearer, the B-word looms large… We will take a closer look at the ramifications in our look ahead on Page 24.

Elsewhere, the arrival of GDPR created a spike in activity for lawyers. “Some clients understood the level of change needed and planned ahead, others were a bit more last minute,” says Wernham of CMS.

“As we approached May 25, we had about 100 lawyers working with clients to help them prepare for GDPR.

“We mobilised a project in summer 2017 to look at all our data, our processes, our suppliers and how we use and store personal data. Clients looked at issues such as contract remediation, how could they respond to the different
data subjects’ rights, did they understand the data they held and had they assessed all of the risks and lawful grounds for holding that data.”

Looking forward, The Law Society of Scotland recently launched LawscotTech – to stimulate legal technological innovation in Scotland and deliver practical benefits in justice. President Alison Atack says: “We are aiming to drive innovation in legal technology and encourage lawyers and tech experts to work together to develop technology-based solutions for the legal sector.

“The Civil Litigation Act will see group actions allowed on either an opt-in or opt-out basis. Potentially, these group actions will involve such huge documentation that there will be a need to bring artificial intelligence to bear, sorting through the disclosure process as is already happening in commercial cases in England and Wales.”

In the courts, Gordon Jackson, Dean of the Faulty of Advocates, thinks recent court reforms continue to have a positive impact: “I think from a public point of view, the Scottish courts are operating well. They are much more efficient. The Commercial Court is operating very well. Designating judges for specific areas like this is very helpful.

“However, the cost of getting into court for a civil litigation is still far too high and a huge disincentive to many people. We have to have more realistic access to justice – but although Scotland’s Legal Aid system isn’t perfect, it’s better than anywhere else I know.”

This article appeared in the Scottish Legal Review. A digital edition can be found here.