EDINBURGH-headquartered law firm Anderson Strathern had a tough end to 2015/16, with the aftermath of the Brexit vote scuppering its final quarter and rising liabilities seeing its pension deficit swell by 37 per cent.
Thanks to its financial year running to the end of August, the firm’s accounts for the year include two full months of trading following the UK’s decision to leave the European Union, with managing partner Murray McCall noting that activity fell off during that time.
“Our results are to the end of August and I would say that until about May last year things were looking pretty optimistic,” Mr McCall said.
“We were ahead of budget at that point and heading for a position that would have been similar to or exceeded the year before.
“I’m keen not to attribute all of this to Brexit but even before the vote we had noticed a slowdown in our commercial property practice and in corporate transactions.
“There was a degree of uncertainty beginning to creep in at that point which was more about nervousness about the state of the economy. That confidence in certain areas didn’t come back for some time.”
Mr McCall added that the year could be characterised as “three quarters of growth followed by a quarter four that was pretty poor and that had a knock-on impact on turnover”.
Full-year turnover fell by three per cent, from £21.7 million to £21m, while partner profits dropped by 15 per cent, from £7.2m to £6.1m. The firm’s turnover has hovered around the £21m mark for the past five financial years, having fallen from £22.8m to £21.6m in 2012/13.
Mr McCall said the drop in profitability was more pronounced than the reduction in turnover because the firm had made a number of significant investments during the year.
“We did a rebranding and we invested in new technology – we spent a lot to prevent us from cyber-attacks,” he said.
“That money had already been spent so it had a knock-on impact on profitability. We could have put the brakes on on that investment when we realised that things were not looking so good but we thought it’s for the long term so we’ll take a bit of a knock then pick ourselves up and move on.
“This financial year that’s what has happened – at the half-way point at the end of February we were ahead of where we were last year.”
Elsewhere, the firm’s final salary pension deficit rose from £1.9m to £2.6m over the 2015/16 year as a result of its expected obligations increasing from £6.6m to £9.2m while its assets increased in value from £4.7m to £6.6m. The firm made a payment of £350,000 into the scheme during the year.
The scheme, which is closed to new entrants but pays earnings-linked pensions to former staff, is part of the industry-wide Scottish Solicitors Staff Pension Fund.
“Our hands are tied in terms of what we can do about it,” Mr McCall said. “It goes up from time to time but it doesn’t cause us a great amount of angst. It was set up many years ago in a different age. We’ve got used to it and budget for it and it forms a part of our overall payroll.”
Looking at the current financial year, Mr McCall said the Brexit vote is continuing to have an impact on the kind of work the firm is doing, with immigration matters becoming more of a feature in its practice mix.
“A lot of that has come from the employment department,” he said. “Employers are casting their nets further afield because they think we might not have the steady flow of European citizens [after Brexit].
“They are looking wider and grappling with immigration issues in a way that they haven’t had to before.
“Immigration has not been a major area of law in Scotland but it is growing.”
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here