Headline profitability up, but it's still a tough climate for
law firms
The Law Society of Scotland's annual Cost of Time survey has
shown the first rise in profitability for law firms since 2008.
The 2011 survey has shown median profitability of £71,000 per
partner at Scottish legal firms, which shows a return to 2004
levels but remains well below the highs of 2005 to 2008.
Sole practitioner solicitors and smaller firms continue to be
worst affected, in particular those which undertake legal aid work,
with profits per partner around £46,000 for sole practitioners and
£75,000 for partners of 2-4 partner firms. Medium sized firms
of 5-9 partners appeared to show strong growth with a per partner
profit of £80,000, up from £66,000 in 2010, while 10+ partner
firms, showed a sharp drop from the 2010 survey figure of £178,000
to £144,000 per partner, the sample of such firms was small, and
included some different firms from those who took part the year
before.
In total there were responses from 238 legal firms across
Scotland, making it the largest annual survey of its type carried
out by any UK Law Society.
The study showed that sole practitioners outside the cities
fared better than their urban counterparts, with median profits of
around £57,000 compared to £42,000 and £40,000 in Glasgow and
Edinburgh respectively. Sole practitioners in Aberdeen, Dundee and
Perth fared worst of all, with median profits of around £29,000,
although again this sample was small.
The research presented a more mixed picture for firms of 2- 4
partners with little or no increase for rural firms, at £76,000.
Those in Aberdeen, Dundee and Perth, remained at £72,000. The
survey showed a significant increase for Edinburgh firms of this
size from £51,000 in 2010 to £81,000, around the same level of
profitability shown in 2006, while Glasgow firms showed a £10,000
drop to £67,000 last year. The Edinburgh and Glasgow results
reflect differences in the make up of firms from 2010.
Lorna Jack, chief executive of the Law Society of Scotland,
said: "The survey shows that there are still very mixed fortunes
among our membership and, while it is heartening to see that
overall, there has been a slight upward swing, it is apparent that
smaller law firms continue to be hardest hit by the downturn.
"The report's authors Andrew Otterburn and John Pollock predict
that the economic conditions will continue to prove difficult for
solicitors throughout 2012 and we are encouraging our members to
think very seriously about how they shape their business and look
hard at their strengths and weaknesses to help make the most of
opportunities.
"The legal services sector will remain highly competitive with
clients continually pushing to get more for less, particularly in
the current economic climate. We are committed to supporting our
members in a rapidly changing environment, which is set to see the
introduction of alternative business structures for law firms and
increased consolidation, and will continue to promote Scottish
solicitors as advisers of choice both at home and overseas."
Further in-depth reports from the Cost of Time survey's authors,
Dr John Pollack and Andrew Otterburn, will be published in the
February and March editions of the Journal.
Notes to editors
The Cost of Time Survey is carried out annually by Dr John
Pollock from Pollock & Galbraith Consulting Actuaries and the
full report prepared is jointly by him and Andrew Otterburn, a
management consultant who published '
From Recession to Upturn - financial management and strategy for
law firms' in 2010.
Further results from the survey will be published in the Law
Society of Scotland Journal magazine in the February and March
editions.
FOR FURTHER INFORMATION: Please contact Louise Docherty on 0131
226 8884 or email louisedocherty@lawscot.org.uk
ENDS
13 February 2012