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More IT Investment needed for Scottish legal firms

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Henderson_LoggieThe latest annual legal benchmarking review from Henderson Loggie, in conjunction with the firm’s UK accountancy association MHA, points to encouraging signs of growth for a second year, most notably through an upturn in the property and construction sector.

However, improved fee income has not translated into increases in net profit. Most firms have had to recruit new staff to cope with their workloads and many have seen their salary costs increase, as well as being faced with the costs of auto enrolment pension schemes and increasing premises costs.

Report highlights:

  • Firms with more than five partners had achieved growth of between 13 per cent and 27 per cent, smaller firms and sole practitioners achieved growth of just five per cent and three per cent respectively.

  • Sole practitioners were the only size of firm to increase their net profit percentage – from 25 per cent to 29 per cent.

  • For the first time in four years, salary costs have increased or remained stable as a percentage of fees for all but the largest practices.

  • Consistent reduction in debt and capital funding requirements over the last three years.

  • More control over lock-up – in the largest firms, lock up equates to a value of £5.4 million per firm, an improvement in lock up of one day would generate £42,000.

  • Over the last three years, no increase in IT spend as a percentage of fee income.

    • David Smith
    David Smith

    David Smith, head of the professional practices sector at Henderson Loggie, said: “Fee income is up but bigger is not always better, and growth is not reflected in the profits of firms other than the sole practitioners.

    “As well as staffing and property overheads, inefficiencies in productivity and time management can have a significant downward pressure on net profits and improvements can be made through the use of technology.

    “It is clear from our review that larger firms have not made substantial changes to their working procedures which is echoed by the lack of real investment in IT spend.”

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