Almost £3bn could be stripped from legal sector turnover by 2025 if the UK crashes out of the EU without a deal according to new economic forecasts released by the Law Society of England and Wales using alternative Brexit scenarios developed in collaboration with Thomson Reuters.
Law Society president Christina Blacklaws said ‘UK legal services look to have been relatively buoyant through 2017-18, thanks to a combination of Brexit-related work, steady demand from UK businesses and an uptick in business from non-UK clients taking advantage of the depreciation of the pound.’ She explained, ‘However, Brexit is likely to have a significant negative effect on the legal sector in the medium and longer term. This is largely due to the knock-on impact of Brexit on the wider economy as demand for legal services relies on the success of other sectors of the UK economy.’ The econometric model used predicts 2.2% average annual growth from 2019 – 2025 with a soft Brexit, which drops to just 1.5% with ‘harder’ Brexit options. In the case of a ‘no deal’ scenario, the model predicts growth would only be 1.1% per year on average. The Law Society research unit’s econometric model uses and builds on macroeconomic forecasts from the National Institute of Economic and Social Research (NIESR) and the IMF World Economic Outlook alongside Office of National Statistics reported data.
Ms Blacklaws stated, ‘lack of agreement on Brexit negotiations combined with volatile global markets mean that we’re standing on thin ice publishing economic forecasts just now, so we are reviewing our figures regularly and looking at a range of Brexit scenarios.' Employment in the sector is a core concern, with lower growth and less investment in UK firms leading to lower productivity growth in the sector. Under the Canada-type free trade agreement, Law Society forecasts estimate that by 2025 employment in the UK legal services sector could be 4,000-5,000 less than it would be under a soft Brexit scenario. Under the WTO rules by 2025 employment could be 8,000-10,000 less than it would be under a soft Brexit scenario. However, Ms Blacklaws admiits, ‘shifts in employment are less certain than other figures in our forecast due to the range of Brexit scenarios and the effects of these on productivity.’