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.”
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