Since the June 2016 referendum, Brexit has been an inescapable fact of life. The initial announcement caused shockwaves to ripple through industries worldwide, and the legal market is no exception. The UK’s legal industry accounts for 10% of the global market, was worth £32.7bn in 2017 and employs an estimated 380,000 people, making it an economic powerhouse. Brexit has had – and will have – significant implications in the market, particularly as the 31st October deadline looms closer.
The ongoing uncertainty around the outcome of Brexit and its potential repercussions on the legal industry is creating concern for many. Here’s what we know so far:
The market response has so far been better than expected
While the initial Brexit announcement generated predictions of a crashing economy and significant loss of jobs, the response so far has been less dramatic. In fact, many law firms and legal practices have been busier than ever. The Law Society reports a buoyant 2017-18 period thanks to Brexit-related activities creating more work for organisations, as well as steady UK demand and an increase in work from non-UK clients taking advantage of the depreciation of the pound. In fact, some have suggested that Brexit could actually offer the UK’s legal sector enormous opportunities, which is perhaps why so many law firms still didn’t have contingency plans in place at the March 29 deadline. Regulatory advice has been in high demand in the wake of the Brexit news, and many big law firms have implemented dedicated Brexit taskforces to address the increased workload Brexit has provided. On top of this, the UK’s top 100 law firms achieved an average fee income increase of 7.7% in 2017/18, suggesting many in the legal sector are thriving in the face of Brexit. US firms are continuing to expand their presence in the UK, with the likes of Winston & Strawn, Goodwin and Gibson Dunn initiating training contracts in London.
What's still to come?
The outcome of the new October 31st deadline – or any deadline thereafter – will largely determine how impacted the legal sector will be by Brexit. In the event of a no-deal Brexit, it’s been predicted that the UK legal sector could lose 12,000 jobs and £3bn in turnover. And even if the outcome isn’t as significant as this, there will still inevitably be a negative effect on the sector in the medium and longer term due to the knock-on impact Brexit will have on the wider economy. One study shows that just under a quarter of UK law firm partners think a no-deal Brexit will result in a long-term increase in workload – however, in Europe this figure jumps to 64%.
A soft Brexit is largely favoured by the industry, as this would resemble the status quo where possible and maintain essential benefits. According to the Law Society’s econometric model, we can expect average annual growth of 2.2% from 2019-2025 with a soft Brexit, which drops to 1.5% with a hard Brexit.
While the impact of Brexit on the legal sector is still largely to be determined, that doesn’t mean those in the industry aren’t thinking about in. It tops the list of concerns law firms have over their future growth ambitions, although no firms in PwC’s research pool indicate relocating their head office or shutting regional offices due to Brexit. In addition, 43% of the Top 10 firms don’t expect Brexit to impact their headcount, decreasing to 27% of Top 11-25 firms. Slow economic growth in the wake of Brexit could contribute to a headcount drop, exacerbating tight market conditions for mid-level firms. Similarly, firms that cannot access overseas offices may struggle to attract work, which could lead to financial difficulty.
With no outcome currently in sight however, the best thing for legal firms could be to remain agile, flexible and responsive to everything Brexit throws at them.
Future-proof your workforce with IDEX
For many in the legal sector, it’s business as usual despite the loom of Brexit. If you’ve got an influx of work, want to diversify your talent pool or simply want to bring new talent on board, we can help. Contact us to start a conversation about your legal talent pool.