The line-up of the so-called big four Scottish firms altered in the past financial year, with Brodies usurping Shepherd & Wedderburn in fourth place and McGrigors regaining the top spot after a four-year hiatus.
Brodies, which experienced stellar growth under managing partner Bill Drummond in the eight years to 2007-08, has had a more muted performance in the past two years, but still managed to edge past Shepherds in 2009-10 with a revenue of £35.8m. Over the same period Shepherds posted a turnover of £35.3m.
Despite this, Shepherds chief executive Patrick Andrews said he felt that his firm had had “a good year in a challenging market”.
This changes both the make-up and the shape of the big four, with Brodies the only firm in the group to be based solely in Scotland. Until now the big four has been made up of firms that have expanded into London – Dundas & Wilson, Maclay Murray & Spens, McGrigors and Shepherds.
Drummond at Brodies has always been resolute that his firm will not expand outside Scotland, pointing out that, when the Scottish firms with London offices are stripped out, Brodies is the biggest Scottish firm overall.
“We’re number one where it counts,” he said.
Having no direct exposure to the London market has been of benefit to Brodies, with the Scottish economy, which lagged the City’s in the boom years, taking less of a hit in the down market.
This is not the case for Maclays or McGrigors, which have both seen their City businesses contract. For the past few years Maclays’ London office accounted for a third of its total revenue, while in 2008-09 McGrigors’ City base generated 35 per cent of the firm’s total. In 2009-10 these figures fell to 25 per cent and 31 per cent respectively.
Despite this, Maclays chief executive Magnus Swanson said there are “still opportunities” in London.
“We were keen to do a merger in London and we remain keen, but we won’t do it with just anyone,” he insisted. “We’ll proceed with more caution, but the ambition remains.”
Despite Dundas losing its place as the largest of the Scotland-headquartered firms, it remains the most profitable of the group, increasing its profit margin to 42 per cent from 37 per cent the previous year. The only other in the group to come near this level of profitability is Dickson Minto, which despite also having a London office does not fit with the model of the other cross-border firms in that it focuses almost exclusively on private equity work. Dickson Minto’s profit margin for 2009-10 stood at 39 per cent, down from 42 per cent last year.
All the other firms in the top 10 have much lower margins. McGrigors, despite generating the highest level of fees, converted 21 per cent of that into profit in the past year, the same percentage as in 2008-09.
Brodies again performed well compared with its peers, posting the next highest margin after Dickson Minto at 25 per cent, although this is a drop from 28 per cent the previous year.
Drummond said the firm had achieved this by “being very careful on all aspects of costs”. He added that the bulk of the cost savings had been achieved through all business support services looking at ways of cutting their spend rather than through job losses or part-time working.
“We didn’t want to undermine the quality of the business,” stressed Drummond. “We very much put the people side first.”
NORTH OF THE BORDER: HOW THEY STACK UP
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