Position of legal sector vital after Brexit, paper warns

Safeguarding the position of the UK-based legal services sector, especially that in London, will be vital following Britain’s exit from the EU, a paper by pressure group TheCityUK warns today. 

The paper, The impact of Brexit on the UK-based legal services sector, particularly stresses the importance of the English courts remaining a hub for global businesses seeking to resolve international commercial disputes and of reasserting the value of choosing English law in commercial contracts.

It also highlights the need for "urgent and clear articulation" of how the Government will ensure the widespread enforceability of judgments of UK courts in EU member states and beyond, given the UK would no longer be bound by current EU regulation in this area, also in order to protect the status of London and the wider UK legal services sector.

The sector's contribution to the UK economy, the paper states, was a record high of £25.7bn in 2015, representing as much as 1.6% of total UK GDP and contributing a trade surplus that has doubled in the past 10 years to £3.4bn. Total turnover in legal activities is two and half times that of Germany, and four times that of France, the next two closest European competitors, and the sector employs more than 314,000 people in private practice across the UK – over two thirds of whom are outside of London.

Among other findings in the paper, 42% of legal professionals said that their businesses would definitely relocate legal staff once Britain formally leaves the EU in order to offset the impact of limited access to skilled European labour, 88% of partners in UK law firms said they were concerned about losing talent to international firms, and 58% plan to move elements of their operations to a jurisdiction within the EU after Britain exits. While 60% of UK law firms have hired additional staff to deal with the influx of requests for legal advice from clients as a direct result of the Brexit vote, in the longer term the UK is likely to be a "less attractive" place for global businesses to resolve legal disputes and draw up commercial contracts.

Key recommendations for the Government to consider in order to optimise the future legal framework and ensure the sector’s continuity and competitiveness include:

• Reaffirming the value of the choice of English law in commercial contracts and ensuring the English courts remain an attractive jurisdiction to resolve international commercial disputes. This will support the legal sector’s ability to maintain its direct contribution to the UK economy and the ecosystem that underpins the UK as the world’s leading global financial centre.
• Providing an urgent and clear articulation of how, post-Brexit, the future position of the UK in the area of cross-border civil justice within the EU will be addressed. This will be important in seeking to address uncertainty – and possible litigation – arising from the potential for parties to be in breach of contract due to possible regulatory variations after Brexit.
• Continuing to allow firms to access legal talent and skills on similar terms as they do now under the current unique set of lawyer-specific directives – important to maintaining and enhancing the UK’s strong tradition of being an open market.
• Continuing the productive engagement with sector-specific industry bodies to assess and understand knock-on impacts of Brexit on the legal sector. Key sectors supporting legal jobs and growth include financial services, energy & utilities, technology, media & telecommunications and real estate and construction.

Miles Celic, Chief Executive, TheCityUK, commented: "It is vital that the key challenges and opportunities for the sector are addressed in the Brexit negotiations and that its competitiveness is maintained and enhanced.

“The sector is working on these issues and providing that insight into Government, allowing ministers to draw on the UK’s unique reserve of world-leading legal expertise. The best Brexit deal will be one which is mutually beneficial to the UK, the EU and globally and which allows for a clear and predictable shift from current business conditions to whatever new arrangement is agreed."

Click here to access the report.