Large legal firms see revenues rise as practices with fewer partners struggle

● Sole principal firms have median profit per partner £28,000 lower than average

A financial health check of Scottish law firms has indicated a revenue boost for larger legal companies but trying times for smaller practices, particularly sole principal firms.

The 2018 Financial Benchmarking Survey from the Law Society of Scotland and Clydesdale Bank highlighted “substantial differences” in profit per partner figures betweenlegalfirmswithfewer than ten partners and those with ten or more.

Those with more than ten showed a significant improvement in the median profit per partner to £172,000, a 38 per cent increase on last year’s findings.

The median profit per partner results for smaller firms were relatively static, at £79,000 for two to four partner firms, down from £82,000 in 2017, and £94,000 for five to nine partner firms, a drop from £96,000 the year before.

Sole principal firms participating in the survey had the lowest median profit at £48,000 per partner, compared with £50,000 in the previous year, suggesting they are operating “at the margins of commercial viability”, according to the report.

The figures showed an increase of £7,000 in the overall median profit per partner figure, before any salary drawings, to £76,000.

Alison Atack, president of the Law Society of Scotland, said: “The increase in the median profit per partner, although largely driven by the bigger law firms, indicates the Scottish legal sector is in pretty robust health overall which is encouraging.”

However, she said the findings indicated the smallest firms are finding it tough, adding that Scottish solicitors operate within an “increasingly competitive marketplace”.

She said: “This year’s financial benchmarking report provides insight for solicitors on how the legal market is performing as a whole, as well as enabling them to benchmark themselves against their competitors.

“The findings can guide their future planning and help them assess what is working well, in addition to any changes needed to develop their business.”

Sue Carter, UK head of professional services sector at Clydesdale Bank, said: “The fact that profit per partner for two to four and five to nine partner firms has remained relatively static, suggests they have perhaps suffered most from increased overheads, including salaries.”

She said firms with five to nine partners indicated higher running costs, without seeing significant benefits of economies of scale compared to smaller competitors.