In general, the sector has returned to levels of improved profitability. Over the past seven years the legal profession has had to take a much stronger grip of its debt and cashflow, as firms have recognised the need to reduce the levels of gearing on balance sheets. Cost structures have been transformed to be more aligned and efficient, with fees rendered being managed more effectively than in days gone by.
The consolidation of the sector is not a new trend, but is certainly one that is set to continue throughout 2016 and into 2017. This has been the case since 2013, dubbed by PwC as a “watershed year” for legal organisations in Scotland, when merger activity and restructures consolidated and polarised the market – between those firms that were growing and those that were struggling to survive.
Today we see this evolving with more strategic partnerships being created on an informal basis. Increasingly we are seeing firms working together, as the senior partner demographic within long-established law practices look for a managed exit to retirement.
This trend of retirement among senior partners will also have a big impact on the overall shape of the industry. Over time we will begin to see fewer and fewer owners, and more and more employees as the swing in the ownership structure moves away from the traditional equity and partnership model to a greater number of limited companies being managed by well paid employees. This marks the corporatisation of legal firms, reflecting wider corporate business models in which those running practices carry less risk, with no personal assets on the line.
This changing face is also being seen in the gender split of the sector. For the first time female solicitors have tipped the balance and now account for 51 per cent, edging slightly ahead of men on the roll. However, with less than a third (28 per cent) of partners being women, there is still a way to go until we see a real change at the top of the profession.
Looking more broadly at the industry and the smaller end of the scale to the high-street lawyer, I feel I have to disagree with the general view that their days are numbered. The reality is that people will always want to look into the whites of their legal advisers’ eyes and crave the interaction and specialist advice that they’ve always received. So for the last lawyer in town in many rural locations, I think they will still have a place providing a broad and valuable service in our communities.
One trend that we are sure of, which must be celebrated at this evening’s Scott + Co Scottish Legal Awards 2016, with a prestigious system and reputation for excellence, is that our Scottish legal profession will continue to set standards and raise the bar, however it is managed or owned. Good luck to all 35 firms shortlisted as finalists and here’s to the next decade of our thriving and evolving sector.
• Mark Sim is relationship director and part of the solicitors’ team at Bank of Scotland