The legal profession is facing challenges, but opportunities for growth exist both in Scotland and overseas, says Kirk Murdoch
What to make of the Scottish commercial legal market these days? We have had a slew of recent financial results from Scotland’s top law firms. It is a mixed picture at best.
Some of Scotland’s best-known firms have seen their turnover deteriorate in the wake of the downturn, with some big names experiencing drops in revenue of up to 20 per cent since the height of the market in 2006-07.
Others have had a good recession, with turnover increasing by as much as 50 per cent in some quarters over the same period, and the established order changing almost beyond recognition.
It seems, notwithstanding any market failures, that in a dynamic environment the death knell of Scottish law firms is much-exaggerated.
However, it is notable that in its recent analysis of financial performance among UK law firms, the entry threshold for Legal Week’s “UK top 50” firms was a turnover of £51.8 million – meaning, for the first time that I can recall, no Scottish headquartered law firm was listed among the UK elite.
This should give all of us in private practice pause for thought.
Here in Scotland, we often hear talk of a “Big Four” or a “Big Five”. However, the fact is that – even where growth is being achieved – a domestically-focused Scottish elite is not keeping pace with the broader elite of UK and international firms.
Creating jobs and opportunities for young lawyers
This poses questions about the future of the profession and how we grow and develop to keep up with our clients.
This isn’t about bolstering revenues or lining pockets, it’s about creating jobs and opportunities for aspiring young lawyers in Scotland – and most importantly, understanding and delivering what clients want.
That challenge excites me. Scotland is a fascinating market to be a part of at the moment. Change is all around us and the best news is that the quality and ambition of our graduate recruits is as impressive as ever. They are the lifeblood of the profession and need to be encouraged and nurtured as such.
The past two years have seen a string of mergers, not least that between Pinsent Masons and McGrigors.
That deal has given me and my colleagues in Scotland greater opportunities to widen our horizons and talk to Scottish clients about what they are looking to achieve both at home and overseas, and talk to investors coming to Scotland about their ambitions.
Huge opportunities for inward investment
Time and again, we find the reputation of Scottish legal training is world-renowned and the quality of lawyering much-admired. Our reputation is a strength which we need to capitalise on. Some of the most valuable opportunities for Scotland lie in exports, and legal services are no different.
There are also huge opportunities for inward investment as a result of the reputation of Scottish lawyers and indeed the quality support services modern commercial law firms increasingly rely upon.
Firms operating from a single site in the UK – typically London – are under intense pressure to move parts of their operations to lower cost bases. We have seen this happen in Belfast, where major firms such as Herbert Smith and Allen & Overy have opened centres.
Thanks to the excellent work of Scottish Development International we are starting to see it in Scotland, where Ashurst is due to create jobs in legal and support services in the coming months.
Having new firms operating in Scotland, plugging us into the global flow of commerce and generating wealth here – rather than elsewhere – for lawyers and talented finance, HR, IT and business development practitioners, is something that we as a profession should welcome.
Lawyers are, as a breed, generally cautious, and that often comes to the fore during periods of immense change. However, on this occasion at least, I think we need a change of mindset.
We are starting to see a very different type of Scottish legal market emerging where concepts such as the “Big Four” somehow seem less relevant.
Yes, we will still have a number of high quality commercial firms focused on domestic work. However, I would be surprised if Pinsent Masons remains the only international firm with a material presence in Scotland.
I would also be surprised if Ashurst is the last City firm to create jobs here, and further still if the advent of Alternative Business Structures does not contribute to a changing picture. One thing is certain; greater variety means greater choice for clients and more opportunities for young lawyers – and that can only be good.
• Kirk Murdoch is chairman (Scotland and Northern Ireland) of Pinsent Masons