There are too many lawyers and too many law firms in Scotland, a survey of the legal profession has found.
Although Scotland’s law firms report being “optimistic” about trading in the coming year, more than half of law firms north of the border have held merger talks in the last year and 37% think it is likely more firms will collapse, according to accountancy firm BDO.
BDO found that 53% of firms reported that they had held merger talks in the last year. Of these, 67% cited a lack of a suitable culture as the main reason for not merging followed by 33% citing onerous property lease commitments. Three quarters of respondents believe that more mergers with UK national firms will happen in the next 12-18 months and 63% think there will be increased consolidation of mid-tier Scottish firms.
A significant 37% of firms believe that it is likely or highly likely that more law firms may become insolvent in the coming year.
Yet the survey, entitled ‘Gearing up for the future’ found that 88% of firms reported higher fee income in the first half of the financial year 2015/16 and 65% stated that they would have higher Profit per Equity Partner (PEP) than the same period last year.
In 2015 82% of firms’ recruited additional staff and 35% of those have increased their headcount by over 5% whilst 88% report that they will be recruiting additional numbers in the next year.
Martin Gill, head of BDO in Scotland, said: “These figures reveal a legal sector which is remarkably optimistic and seems to have bounced back from the recession with some force. However, countering this optimism remains the view that the market is saturated with 69% of firms believing that there are simply too many lawyers and too many law firms in Scotland.”
He added: “It is clear that the legal market believes that there are too many law firms and lawyers chasing too little work and that mergers and even failures are the likely outcomes in the coming year. The Scottish market has changed over the last few years and adopted more business-oriented and realistic approaches to operating law firms but there may still be some way to go.”
