North East: Work to rule

Home Group was created in the mid-1930s by an Act of Parliament, in response to poverty faced by the North East, although back then it was called The North Eastern Housing Association. Nowadays, its housing stock runs from Dundee to Cornwall, numbering around 55,000 properties. However, as director of legal Austin Woods puts it: ‘We’re very diversely spread but the roots of the business are very much founded within Newcastle, and will stay within Newcastle.’

The landlord business is core, and the company is conducting a full stock condition survey, to obtain granular detail of the condition of its properties on the inside and structurally. The non-core arms of the business are development, and care and support. The latter’s services include the health sector, providing assistance to those with debt, housing and mental health problems, to alleviate pressure on hospital beds and GP services.

The in-house legal team conducts 90-95% of the company’s legal work and is commensurately large – numbering 20 people, 14 of whom are qualified lawyers. The bulk of outsourcing happens when there’s a significant project requiring cutting-edge advice on something and there’s a lot of risk for the business, although he adds that ‘my team will also work in conjunction with the external counsel to reduce the bill and create best value for money’.

There is an informal panel for small pieces of work, but for anything substantial, the team would conduct a procurement process, because ‘we want to make sure that we fully follow the EU procurement requirements for any tender that we do’.

For Woods, good communication is essential to getting the right advice. ‘We are in a fairly unique sector, and obviously I’ve got a very large legal team with a wealth of knowledge in here. So it’s how outside lawyers can plug in and be an extension of my in-house legal team to make sure that we work together.’

Woods finds that for smaller pieces of work, ‘sometimes you’ll get a higher quality of service from some more regional law firms than you necessarily would from some national ones in the City – because the smaller bit of work is probably more attractive for the regional ones than it is to some of the big City firms down south’. Although Woods enjoys good service from City firms, he says: ‘It’s nice to be able to pop into the office and talk a deal through with someone.’

‘We’ve come through a very difficult period in the construction industry,’ says John Dickson, chairman and managing director of Northumberland’s Owen Pugh. This has been especially bad in the North East, he adds, attributing this, in part, to low public sector expenditure on infrastructure in the region. But at last the area is now seeing ‘a real upturn in opportunities, more work around, output prices improving, and margins just beginning to improve’.

The North East’s slow recovery from the recession hit companies like Owen Pugh, which is ‘deliberately a regional business’, according to Dickson, operating in what he terms ‘an insular marketplace’. But a strong regional showing is also an advantage, because the company is well known and well respected and, therefore, ‘we get a lot of repeat business’.

The industry as a whole can be very litigious and so contractual terms and conditions are a particular cause for care. ‘As everybody gets busier, the temptation is to just rush on, get on to the next site and dig the next hole. But you’ve got to get your contract terms and conditions right first,’ says Dickson.

However, his present biggest cause of sleepless nights is the issue of holiday pay, recently debated in the European Court of Justice (ECJ). The ECJ and the UK’s Employment Appeal Tribunal have been grappling with the issue of whether holiday pay should be based on fixed salary or average pay (including add-ons like commission and overtime). Employment law in general is a problematic area for businesses, feels Dickson, because ‘the whole legal playing field is tilted against the employer and in favour of the employee, to the extent that life becomes very difficult’.

Owen Pugh has one in-house lawyer, focusing on debt collection and contractual matters. In addition, it has a relationship with a North East-based firm, via a monthly retainer, for unlimited advice and guidance, particularly in the employment field. The firm is also used for property transactions, complex commercial contracts and litigation. Dickson uses other firms as the need arises, but prefers not to tender formally, instead working ‘on the basis of personal recommendations from people we know in the industry’. If a particularly significant matter arose, however, he says, ‘it is possible that we would then go out to the market’.

When procuring, a regional presence is key for Dickson who believes in supporting local businesses. And there is a certain perspective that a regional law firm can bring, too, he says. ‘They share a position in the local economy with us, they know the likely players, they know what’s going on, they’ve got a history and a connectedness to the region. The law is the same across all regions, but the people aren’t the same – there are individuals and characters and companies here that don’t exist elsewhere. And I like to be able to see them.’

Social housing organisation Thirteen Group was formed in 2014 through the merger of Fabrick and Vela. Among the many goals of the organisation are managing its asset base of 32,500 properties to ensure quality and sustainability (including minimising fuel poverty), investing in new development, working in partnership with other public sector organisations to lever in efficiencies, and to generate social capital in the region. As group director of resources, Heather Ashton says: ‘A key priority is to add to the economy of the region, and if we can, support training and employment to get our customer base back into work. We very much have an ethical heart. We’re keen to invest and innovate.’

Following the merger, the company has gone through a restructure, with resulting redundancies, and therefore at the forefront of Ashton’s mind is ensuring the recruitment process is fair and equitable. Other areas of legal focus include corporate finance – protecting existing financial arrangements while raising new finance – as well as how best to do business without breaching charitable objectives.

The organisation has a four-strong legal team which is busy with issues such as managing tenancy agreements, sales and purchases of housing stock, and new development and construction matters. Ashton outsources substantial work arising from employment and corporate finance, because it follows ‘large-scale projects on an ad hoc basis rather than the more day-to-day work that’s our core business’.

Thirteen doesn’t have a formal panel, and Ashton prefers an approach based on previous experience and knowledge, reputation, and reading the trade press, but would go through a full procurement exercise for a large project. When instructing, she says: ‘If they understand the challenges in the North East rather than the legalities per se, then that really helps. So if they understand the sector, understand the region and are technically strong, then that’s the kind of expertise that appeals to me.’

A solid regional understanding, for Ashton, involves appreciating ‘the implications that some decisions can have, and how they would be interpreted in this region’. She adds: ‘It’s all well and good to get a textbook answer, but then if you don’t understand the context in which we’re operating, you might give me some advice about a project that actually I’ve not got a chance of taking up or delivering.’

Fundamental to a good external legal service is cost, speed of response, understanding of the actual crux of the issue and the ability to distil the context of the issue and turn that into practical advice. ‘Being able to deliver that in plain English does help,’ she adds.

Fundamentally, however ‘the quality of legal advice stands head and shoulders above most things’ and it is also important that legal advisers know their place – ‘that they know they are advisers and that they don’t control the situation. I will take commercial decisions based on my perspective and my view’, she says.

National bakery and food-on-the-go retailer Greggs prides itself on ‘keeping people, values and communities at the heart of the business’, according to company secretary and general counsel Jonathan Jowett. The community part is key, and its Newcastle base has ‘had a fundamental influence on the company’.

When it comes to buying in legal services, ‘we have a long history of association with law firms in Newcastle’, says Jowett, although he reflects that: ‘These days, you don’t need to instruct a local firm, so long as you have a good relationship with the lawyers.’

‘Most important is high quality at a good price, and that is the motto we would apply to buying any services, legal or otherwise. You have to sell a lot of sausage rolls to pay a solicitor an hourly rate, and I have no hesitation in reminding them of that,’ he reveals.

This way of thinking has, on occasion, driven the legal team to go beyond law firms to instruct the Bar direct. ‘There were some particular regulations on which we needed an interpretation that were new and untested in the courts. There were solicitors who were able to give us an opinion on that, but a couple of times it was suggested that they would want to seek the view of counsel. My view was – “well, why have a middle man?”’

In any case, outsourcing is not usually the route Jowett prefers the team to take. ‘As a general rule we try to keep stuff in-house,’ he says, but in addition to employment and Scottish commercial property matters, ‘when we come across an area that needs a specific expertise, then we would outsource that’. The team decided recently to in-source its English and Welsh commercial property work and now has a team of three solicitors who are first and foremost commercial property lawyers.

At the top of his current to-do list is regulatory change. There are new labelling requirements coming in at the moment that could affect the way some of Greggs’ food is packaged and labelled, so the team will need to fully understand what the requirements are and implement the legislation accordingly. Recently, the company has been thinking about the carrier bag tax that came into force in Scotland in October. However, he says: ‘We’ve been dealing with the carrier bag tax in Wales since last year, so it’s not really a new problem. We’ll apply the same process in Scotland as we’ve done in Wales and then again in England when the charge comes in during 2015.’

‘The great joy of a software company,’ says The Sage Group’s company secretary and group legal director Michael Robinson, ‘is that you’re not geographically tied.’ As he points out: ‘There’s a move in our industry to provide more products online than via traditional software, so we’re pursuing a strategy where we offer customers both.’

For Robinson, supporting that strategy means thinking about issues raised by developing areas such as cloud computing and data security, although, he notes, he is not alone in that. ‘Everybody can see that that’s going to be an area of more and more focus, and inevitably everybody’s business, almost in whatever you do nowadays, has to address those kinds of concerns,’ he comments.

Serving the software needs of an international client base requires only a good quality workforce according to Robinson, and Newcastle is able to provide that in abundance. ‘We have two universities, a very skilled workforce and we’re a large employer in the area,’ he says.

Although it could technically operate from anywhere, Sage is historically linked to the area – ‘it was formed very much by people from this part of the world, the three founders were all local to here’, says Robinson, adding ‘we have always regarded ourselves as very closely linked to our region, and are very happy to stay here’.

His team keeps much of its commercial and IP and IT contractual work in-house, and then outsources litigation, property, and some M&A matters, using a group of law firms both locally and further afield. ‘We’re lucky that in Newcastle we have a number of very good law firms, so we have the benefit of people on our doorstep,’ he adds. When a matter needs a global reach, the international nature of the industry and customer base of the company means the group has no problem with reaching out to a firm with a global footprint to match its own.

Newcastle upon Tyne-based software company Silverlink Software has been acquisitive of late, according to director Tim Quainton. The company bought software and staff from an administrator this summer, and so integration is now foremost in his mind. The number of staff has increased to a headcount of around 30, and he expects to report increased turnover this year.

As a software development house, the biggest area of legal concern is protecting the intellectual property rights of its software products. High on Quainton’s list of priorities is ‘making sure that we don’t actually lose any aspect of our intellectual property rights, and also making sure that the intellectual property rights are not used by anybody that doesn’t have any entitlement to them’. Also on the table are employment law issues, ensuring terms and conditions are compliant with legislation, and monitoring insurance liability.

Quainton estimates that the organisation ‘spends an absolute fortune on legal’, although with the recent acquisition it has inherited a legally-qualified member of staff who will assist with employment contract work, saving the company a significant sum. Nevertheless, there are no plans to develop a larger in-house function due to the ‘feast and famine’ nature of the work, and, he says, the range of skills to be found in an external law firm. Instead, Silverlink uses a firm with offices in Leeds and London, as do its major shareholder backers, and has no plans to review this relationship.

When it comes to keeping down costs, Quainton explains that: ‘We don’t let the law firm ride roughshod over us: every time I get a large bill I point the chairman of the major investors at them, and he has got a very good understanding of what the cost should be – so we normally get a discounted rate back.’

Where a law firm is based is inconsequential for Quainton, who reasons that: ‘In this day and age, once you’ve got a relationship with someone, it doesn’t really matter where they are.’ After all, he continues: ‘Most of what we do is contracted with the NHS and that’s on a national basis.’

More important than a firm’s geographical base is whether its lawyers can ‘give you confidence that they know what they’re doing’, says Quainton.
 

catherine.rodgers@gcmagazine.com, catherine.mcgregor@gcmagazine.com