"Credit Crunch"

It is impossible to watch the television or pick up a newspaper these days that doesn't have coverage of the oft reported "credit crunch" in the banking system.  It is generally accepted that, when the impact of the credit crunch initially began to be felt last year, many policy-makers believed the disruption to be short-lived, with minor economic impact.  Yet, it has become clear that the impact is likely to last longer, spread wider across the world and affect economic growth more deeply than previously thought.  The Bank of England, for example, has cut interest rates three times since last August but voted to keep rates steady in July to balance slowing growth with increasing inflation.

Confusingly, commentators initially adopted a variety of opinions on the situation, ranging from bullish to depressing, with the term recession looming large in much reportage.  However, as time has passed, they generally agree that there is less liquidity in the market, resulting in some financial institutions not lending (at all) or, at best, lending selectively to existing customers.  The British Bankers Association (BBA) recently reported, for example, that the number of new mortgages approved by the major banks fell by 23% in June to a new record low.  The June figures, in turn, were 67% lower than the same month last year.  It seems highly probable that the credit markets and the housing markets will reinforce each other in a downward spiral. 

What does this mean for business and the legal market?  Undoubtedly, the consequence is difficult times for construction companies and house builders alike, as well as financial institutions.  The media carries high profile and sobering news about large-scale redundancies across a number of business sectors on daily basis.  It is also becoming evident that there will be less work for lawyers involved in domestic conveyancing, Real Estate and Corporate, particularly specialist firms in these areas. 

Closer to home, how is Harper Macleod coping with these economic and business pressures and managing the impact of the "credit crunch"? 

We are a wholly Scottish firm, operating from our bases in Glasgow, Edinburgh and Inverness.  This affords us a lower cost structure than firms operating wholly or partially in the south, specifically the City of London.  Further, since inception 20 years ago, we have purposely structured our firm in a multi-disciplinary manner, operating across 23 practice groups ranging from agriculture to sport.  This balanced, cross-sectoral portfolio helps ensure that areas of growth help cushion areas of softening. 

In addition, we have continued to grow our public sector portfolio.  I am particularly proud that we not only continue to add high profile public sector clients - Forestry Commission Scotland, Highlands and Islands Enterprise and Inverness College, for example, and have also been reappointed to serve others including CSA (Scotland) and the Scottish Government. 

The retention of clients across all sectors has undoubtedly played a role in our success to date.  We actively invest in managing client relationships and ensuring their ongoing satisfaction through client care programmes.  At the same time, we continue to invest in our people and the development of their skills, whilst adding more office space in Glasgow to ensure that we continue to meet and exceed client needs. 

So while these are undoubtedly challenging times for the economy, I believe our strategy and proactive tactical measures position us well.  My principal objective is not simply to manage our firm through these uncertain times, but to grow a successful, sustainable business into the future.

Professor Lorne D Crerar, Chairman

July, 2008