Described last year as both beleaguered and bleak, the Scottish legal market is this year seeing something of a revival as revenue at Maclay Murray & Spens (MMS) – one of the LB 100’s worst performers in 2013 – was last week revealed to have risen by 7% from £40.4m to £43.3m and profit per equity partner (PEP) jump by £50,000 to £261,000, a 24% hike.
The results – which follow Scots rival Shepherd and Wedderburn’s 2014 turnover increase of 6.7% to £38.3m and a PEP increase of 9.8% to £278,000 – came in the same week that Brodies, one of the standout performers among its Scottish rivals last year, unveiled a fourth consecutive year of turnover and profit growth, with a 13.2% increase in revenue to hit £52.1m.
Final leading Scottish independent Burness Paull, created out of the December 2012 merger of Burness and Paull & Williamsons, has yet to publish its results but is understood to have had another good year, after 2013 saw it unveil a turnover of £38.7m, up 59% on legacy firm Burness’ £24.3m revenue at the end of 2011/12.
Dundas & Wilson, which merged with CMS in May this year, is expected shortly to unveil its last independent set of results, after a poor financial performance saw its turnover drop by 35% post-2008 to £48.7m.
MMS has put its growth this year down to improved market conditions and strong performances in corporate, tax, real estate, construction and financial services work that allowed the firm to invest further in five lateral hires last year.
Chief executive Kenneth Shand told Legal Business: ‘There are generally improved market conditions and more confidence, with more investment available to businesses.’
Having last year seen revenue drop by 33% over the five-year period since 2008, the firm’s latest financial results don’t go as far as putting it back to pre-Lehman levels, but its drop over a five-year period has been reduced to 21%.
Shepherd’s latest figures mean last year’s drop in revenue of 16% since 2008 has fallen to 3% since 2009.
It is a substantial recovery and Shand added: ‘The legal sector has faced a period of considerable economic uncertainty and has also had to tackle structural change. We have by no means been immune to these challenges but I am confident we have a very strong platform from which to move forward. Continued investment in our London and Scottish offices, underpinned by our active role in Lex Mundi, the leading global network of independent law firms, remains at the heart of our strategy, which will allow us to support clients across domestic and international markets.’
MMS currently sees around a quarter of its income derived from London and plans further strategic growth, with a particular eye on its successful financial services practice.
For Brodies, meanwhile, since an 8% dip in revenue to £35.8m during 2009/10, the firm has grown its turnover by 45.6%; a compound annual growth rate of 12% over both the last three-year strategic period and the past decade.
Operating profits before partner distributions increased by 23% from £19.3m last year to £23.7m in 2013/14, a year that saw the firm take leases for new premises in Aberdeen and Glasgow, pushing up its costs by 6.2% to £28.4m.
The firm has also invested in outside talent, and in the 12 months to 30 April, the number of partners at Brodies rose from 75 to 80, boosted by seven lateral hires, including regulatory and competition lawyer Rod Lambert from Norton Rose Fulbright in London to its Edinburgh office and corporate lawyer Neil Burgess from DLA Piper in Glasgow. Over the same period, the number of lawyers and professional advisers at the firm increased from 326 to 348.
While some question whether this level of growth is sustainable in light of Brodies’ Scotland-centric focus, Bill Drummond, managing partner at Brodies, said: ‘Over the past year we have seen further sweeping changes in the Scottish legal market. However, this changing environment, and the slowly improving economic prospects present opportunities for Brodies and for our clients. We remain committed to our strategy of supporting clients within and from Scotland in all sectors that are fundamental to the continued success of the Scottish economy.
‘The improving UK economy and more stable conditions in the Eurozone have encouraged many clients to move forward with greater confidence in the long-awaited recovery and to invest in their businesses and ventures. This fed through into increased transactional activity for the firm, especially for our real estate, corporate M&A, energy and finance teams.’
Senior partners are largely feeling optimistic for the year ahead, although hanging over the recovery is the untold impact of the referendum on Scottish independence on business confidence and investment, with the summer months expected to see a slow down. However Shand said: ‘We have a lot of projects in the pipeline. At worst they will come about in the Autumn and we’re cautiously positive.’
Tom.moore@legalease.co.uk
Caroline.hill@legalease.co.uk