As government officials in the United Kingdom continue to negotiate the terms of the country’s exit from the European Union, the rising possibility that the final result could trigger a so-called ‘No-Deal’ Brexit, which has raised uncertainty across the continent.
This uncertainty has consequently led to much speculation about the future legal and regulatory landscape in the UK, the country’s relations with the EU countries, and whether all this regulatory upheaval might lead to changes in the legal market and practice of law within the UK.
To provide further insight into Brexit’s economic impact on UK legal services, a new report, Helping to Understand the Impact of Brexit: The Economic Outlook for UK Legal Services, was published by Oxford Economics in partnership with Thomson Reuters and the Law Society of England and Wales.
According to the report, the UK’s Brexit vote in 2016 helped to accelerate the growth of the UK legal services sector in the short-term, but that is likely to change if the UK cannot successfully negotiate an exit to the EU on favorable terms. In the event of this ‘No-Deal’ Brexit, the report suggests that the country could see a significant decline in its legal services sector in both growth and the number of employed lawyers.
Research shows that between June 2016 and December 2017, the output of legal services in the UK, as measured by value added, rose 5% in real terms, even outpacing real UK GDP, which increased 3% over the same period.
A key factor driving this growth was the increased demand for legal advice resulting from the uncertainty initially created by the Brexit referendum and the UK’s likely departure from the EU, according to the report. In fact, there is likely to be a further rise in demand for legal services which will be generated by potential regulatory changes and the need to re-write contracts.
Despite this, there is significant pessimism among legal professionals regarding the possible consequences of a ‘No-Deal’ Brexit. Predictions say that the UK legal services sector’s output could decrease by 2.1% by 2025 — the equivalent of £840m (more than $1 billion) in real terms. In addition, the UK legal sector would likely contract, employing 7,400 fewer people in the same time frame.
“The UK legal services sector has performed well partly because of the legal challenges Brexit presents but this could change as negotiations reach crunch time,” said Jim Leason, vice president of Market Development and Strategy, UK & Ireland, for the Legal business of Thomson Reuters. More than half of the report’s survey respondents suggested they were “not well prepared” to counter threats related to Brexit, such as the loss of London’s status as a global financial center or the creation of new hurdles in the cross-border supply of legal services, he added.
You can download a copy of the report, Helping to Understand the Impact of Brexit: The Economic Outlook for UK Legal Services, here.