The new entity formed as a result of the long-discussed merger of the SDP and Scottish Liberal Party (SLP) saw public support fall to just 3 per cent during 1988. Its nomenclature was also in flux. Initially, they were the ‘Scottish Social and Liberal Democrats’ (SLD); in September 1988 the short-form ‘The Democrats’ was adopted (the Govan by-election in November was fought as the ‘Scottish Democrats’); and in the autumn of 1989 the party finally settled upon ‘Scottish Liberal Democrats’. Yet in the space of a few years, this new party managed to win a by-election in Kincardine and keep hold of all the Alliance's 1987 MP intake at the 1992 general election.

David Steel (SLP) and Robert Maclennan (SDP) served as interim joint leaders of the Social and Liberal Democrats and Sir Russell Johnston as interim leader of the Scottish SLD (he later became deputy leader of the federal SLD). In organisational terms, the latter was to be very much ‘a party within a party’. Much like the former Scottish Liberal Party, it had control over membership, finance and rules. It could hire its own staff, maintain a distinct membership list and set its own membership fee (in conjunction with the federal party) – indeed supporters joined the SLD directly rather than the UK party. As before, two annual conferences served an autonomous policy role alongside the Scottish Executive and Scottish Policy Committee, while the party elected its own leader and senior office-bearers via a postal ballot of Scottish party members. Compared with the Labour and Conservative parties in Scotland, the SLD enjoyed significant autonomy.

The party was candid regarding membership levels. Before the 1988 merger, the Scottish Liberals had around 10,000 members (the SDP had only 2,000 in Scotland). Upon completion of the merger in November 1988, this had been revised down to 7,250, with the party setting a goal of 8,000 by 1989. There seemed to be further losses after 1989, something the political scientist Peter Lynch attributed to post-merger teething troubles and the party adopting a more ‘formal’ centralised approach to membership, in contrast to the ‘looser’ methods deployed by con-stituency parties, Liberal clubs and branches prior to 1988.