News In Focus
Economy a concern for law firms
Scotland’s law firms are facing the threat of large scale redundancies and dramatically reduced profits because of the continuing credit crunch, according to a survey by accountancy firm PKF.
PKF sent a questionnaire to the top law firms in Scotland and 54% said their greatest concern at the moment was the economy, with 36% stating that their second biggest worry is staff recruitment and retention.
Nearly two thirds (64%) of the law firms surveyed believed that the most significant impact of the credit crunch would be a decline in turnover growth, and 55% were concerned about reduced profits for equity partners.
Any law firm with connections to property is facing a significant reduction in income as the market experiences a dramatic downturn in activity. Firms which are heavily dependent on the property market are already making staff redundant.
As reported by the Journal Online last week, the Law Society of Scotland's council was told on Friday that solicitors are facing difficult trading conditions. Domestic conveyancers have been hit particularly hard because of the slump in the housing market.
The PKF survey found that firms have devised a variety of solutions for dealing with the predicted reduction in turnover, with 55% proposing selling more specialist partner time; 45% planning to develop new service lines by recruiting staff from another firm; and 36% seeing geographical expansion as the best option for increasing fee revenue over the next two years.
Charles Barnett, PKF professional services partner, said: “We can see from our survey that Scottish law firms are taking a realistic approach to the downturn in the economy and producing responses which will ensure their survival.
“However for some – particularly those with considerable exposure to property – even immediate action may not prevent them facing a year of redundancies and low profits for their equity partners. Given that partners are the most highly remunerated individuals in the practice, it is logical that some firms may have to experience some departures at all levels.”
He added: “For firms where property does not make up such a large part of their fee income, diversification may produce better results. Law firms, like any other business, are not immune to the credit crunch and developing the services a firm offers either through specialisms, acquisitions or expanding geographically are all sensible solutions to counter a downturn in the marketplace.”
To watch an interview with Charles Barnett, visit www.camagonline.co.uk/Videos/44.aspx .