Slowly but surely the number and influence of in-house lawyers at Scottish companies is growing.
According to the latest figures produced by the Law Society of Scotland’s in-house lawyers group (IHLG), they now account for close to a quarter of all the lawyers in Scotland.
The IHLG analysis reveals that 1,910 lawyers in Scotland work in-house, representing 22.7% of the profession. And the figure is rising all the time, with the last 12 months witnessing a 1.7% increase in numbers.
Although close to two-thirds of in-house lawyers in Scotland work in the public sector, the fastest growth has come in the private sector. An increase of 2% on the previous year saw the number of Scottish in-house lawyers working in commerce and industry rise to 36.5% of the total.
This is an impressive statistic, given the backdrop of the difficult economic conditions that have seen Scotland’s gross domestic product lag behind the rest of the UK and a number of its leading companies bought up.
This tough trading environment has had a particular effect on Scotland’s flagship technology sector. The collapse last autumn of alternative telecoms carrier Atlantic Telecom, where there was at one stage a five-lawyer strong in-house legal department, was perhaps the most high-profile example.
And there have been other examples of downsizing of Scottish legal teams in recent years, notably that of the CGNU team which was cut from 12 to five lawyers (see Benchmarker, page 45). The cuts at the company’s Perth-based operations were as a result of the restructuring of the legal department that followed the successive mergers of locally-headquartered General Accident and Commercial Union and subsequently with Norwich Union.
Despite this, however, the overall trend of a growing in-house legal community in Scotland seems secure.
By far the largest grouping of in-house lawyers in Scotland is in the booming financial services sector, representing nearly one in 10 of the total (8.4%).
One of Scotland’s great success stories, the financial services industry, now employs more than 91,000 people directly in Scotland and was given a major fillip last year by the decision to locate the head office of Halifax Bank of Scotland (HBOS) in Edinburgh.
Companies such as Standard Life, Royal Bank of Scotland and HBOS all have substantial legal departments in Scotland, much of them handling non-Scottish work. (See Benchmarker, page 41.)
Colin Anderson, vice chairman of the IHLG and legal manager at Standard Life, says the growth of the company’s legal team has mirrored the expansion and diversification of the business.
“The business has been doubling in size every two or three years,” he says. “We have increased from about 12 lawyers 10 years ago to 39 now.
“We took the deliberate decision to bring work back in-house because we felt we had a lot of good staff who were capable of doing more challenging things.”
The second-largest group of in-house lawyers in Scotland is the energy and power sector, accounting, according to the IHLG figures, for 2.7% of the total.
The vast majority are based in Aberdeen where global oil majors BP, Shell and TotalFinaElf and independent companies such as the Wood Group all have major operations and sizeable legal teams. While the oil price – currently more than $20 (£14) a barrel – remains above $12 (£8) a barrel, most companies can make a lot of money out of the North Sea and so activity levels are high.
Like the financial services lawyers, though, many of Scotland’s energy lawyers handle a large portfolio of non-Scottish work as well as dealing with interests in the North Sea.
Hugh Fraser, head of the eight-lawyer-strong legal team at Aberdeen-based oil services company the Wood Group, says the team’s focus is much more international than domestic.
“The company has 20 years of expertise to export and we have done that successfully in Venezuela and the Middle East,” he says.
Although the financial services and energy groups dominate the private sector of the IHLG, their numbers, while continuing to grow, are actually down by 0.6% and 0.3% respectively as a proportion of the total. This is because growth elsewhere in the private sector has been outstripped by other industries. While the total increase of in-house lawyers (115) may not seem a huge amount, if the growth is repeated year-on-year it will represent a substantial expansion.
This is particularly the case given that, while there are other industries that employ significant numbers of lawyers such as building, whisky and transport, a large number of Scottish in-house lawyers are the only legally-qualified person at their company.
John Meredith, head of legal and sole lawyer at London Stock Exchange-listed sausage-skin maker Devro, explains why. “Society is becoming more litigious and businesses are faced with more legal issues than ever before,” he says.
“Business is becoming more complicated and boards of directors feel more comfortable with someone who can solve problems. More importantly they can help steer a course that avoids problems in the first place.”
Robert Howat, company secretary and in-house legal advisor at Celtic plc, agrees. “The impression I get is that reasonably-sized organisations, whether public or private, are increasingly looking at the benefits of having an in-house lawyer whether for economic or business advisory reasons.
“One of the major criticisms of external lawyers is the question of commerciality and understanding the context in which advice is given. Giving advice is one thing and giving advice that works is another.”
Whether continued economic difficulties will put the brakes on, the recent growth in in-house lawyer numbers remains to be seen. But it would seem that the logic of having an in-house legal capacity is increasingly becoming accepted among Scotland’s largest companies.
Scottish in-house lawyers
Total number: 1,910
Percentage of Scottish legal
profession: 22.7% (up by 1.7%)
Percentage in private sector: 36.5% (up 2%)
Largest sectors: financial services (8.4%); energy (2.7%)
Geographical location: Edinburgh (30%); Glasgow (15%); Aberdeen (6%). The rest are spread around Scotland except a small number who are based elsewhere in the UK or overseas.
Source: the Law Society of Scotland in-house lawyers group
