The Scottish Legal Market in 2011: Opportunities, not problems

THE legal year in 2011 was an interesting mix, affected by micro and macroeconomics. From a microeconomic and business perspective, it was a slow start, mainly attributable to the severe weather conditions in January and the traditional slow property market in the early months, but by spring business activity for legal services was generally on the up and increased steadily, ending in a busy year for various types of private client work.

From a macroeconomic perspective, the general financial downturn has had an adverse impact on private and commercial clients alike. They have faced, and continue to face, issues such as job losses and debt problems, all of which were on the increase during 2011.

The public sector cutbacks which kicked in last year affected many areas of legal work we do as solicitors. This was not just in legal aid work but also in the background legal work necessary with government agencies, such as Registers of Scotland, employment tribunals and the Scottish Court Service. There were subtle differences in the delivery of services by such agencies last year in comparison to previous years, quite possibly due to a reduction in staffing levels.

These differences vary from changes in systems and processes, presumably to make them more cost-efficient, to fees levied for a previously free service and a slower/reduced service compared to pre-cutbacks.

While some of these changes are not overly problematic individually, when taken together they begin to have an impact on our own practice systems and processes when delivering legal services to our clients – some of which in turn have an impact on the service to our clients which, thankfully, as yet is minimal.

However, some of the most profound effects on us for private client work during 2011 came from the private sector, namely the financial markets and the lack of financial lending again this year. The most recent FSA review of mortgages is one which, I think, will have an initial adverse impact on the already depressed property market for private and commercial clients – but after that initial effect, my view is that, once borrowers get used to the mortgage reforms and get a better understanding of what is expected or required of them, the mortgage market will recover to a healthier level which in turn will help to steady the property market in readiness for a sustainable and steady volume uplift in the next few years.

That is without doubt preferable to the last property boom which was based upon unsuitable, unsustainable and superfluous finance models.

Given that much legal work is affected by the economy and financial markets, I am hopeful that the worst of the economic crisis is over and that 2012 can be a year of taking stock, reflecting on what has happened in the past few years, and planning positively for the future.

I believe that, in turn, will establish realistic expectations, both for providers and for users of legal services, which, in my view, have been missing since the start of the recession in the summer of 2008. In particular, I believe the property market, (albeit with very little growth predicted for 2012) will establish a solid foundation from which to improve in the next few years with realistic expectations. I do not see sales reaching anywhere near the height of pre-2008 levels for the foreseeable future because if lenders continue to be strictly regulated, and they in turn retain strict lending criteria, that, in my view, will be a natural deflator of any prospective property boom. However, it will be a far more sustainable market as buyers and sellers will have a better idea of the marketplace and what they can expect from it – that is not the case at present with an unstable economy. With the introduction of alternative business structures in the Scottish legal services market this year, clearly that will be a concern for some existing law firms which will view it as a threat – but for others it should be an opportunity because of the prospect of external investment.

Some smaller law firms (one-two partners) might see it as a suitable exit strategy for existing partners if they have no succession planning in place. However, for those who see it as neither a threat nor an opportunity, I believe there will be some positive challenges for existing law firms (particularly smaller firms) to rethink their processes and systems, which I think will be good for them and for their clients.

For example, I believe that improvements to, or the establishment of, good websites, a social media presence, case management systems, cloud computing, good marketing strategies and an ethical attitude with open and transparent equality and diversity strategies will all help to deliver in a range of areas. These will include the ‘value for money’ fee, effective communications to clients, and generic marketing of the established, recognisable badge of the trusted professional – the Scottish solicitor.

Prospective entrants such as The Co-operative might well have large marketing budgets and state-of-the-art technology on their side, as well as recognised ethical branding, and they will be tough competitors. However, with some strategic changes to update existing systems and communication methods, existing law firms can retain their important clients and compete effectively with entrants in the legal services market. They can do this by being ‘simply the best’ at what they have actually studied and trained, for years, to do in the first place in a familiar regulatory framework – to give professional legal advice and access to justice.

• Farah Adams is principal solicitor of Adams Law, Blairgowrie, Perthshire.