UK law firms expect to see a long-term decline in work if Brexit negotiations between the UK and the EU end up in a no-deal scenario, according to a survey of 300 law firm partners in the UK and Europe published today by the Legal business of Thomson Reuters .
The report finds that while UK firms are bracing themselves for a new and complex regulatory environment, and looking to expand their businesses into new geographies to hedge an expected downturn in demand for their services over the long-term, European firms are preparing to meet a long-term increase in demand for their services.
“Most of the firms surveyed are advising their clients on how Brexit will affect their businesses,” said Jim Leason, VP, Market Development & Strategy at the UK & Ireland Legal business of Thomson Reuters. “Significantly fewer firms have been doing the same analysis with respect to their own businesses, although it’s clear that some firms are going further and are looking at their own partnership structures and investing in technology to help meet the expected demand.”
Optimism for a short-term uptick
According to the survey, 46 per cent of UK lawyers anticipate an increase in workload over the short-term, while some 72 per cent of European respondents point to an increase in workload.
In specific areas of law in certain countries, the report finds that lawyers in Europe are already helping clients take pro-active measures. For example, banking and finance lawyers in Frankfurt say they are helping clients shift operations to Germany. Likewise, Swiss private client lawyers report assisting individuals in moving from London to Switzerland and Monaco.
But outlook over longer term more gloomy from UK firms
When asked to consider the impact on the future of their firms over the longer term, 34 per cent of UK law firm partners predict a fall in workload while only 23 per cent forecast an increase in workload. Conversely, 64 per cent of European partners predict an increase in workload with only 15 per cent expecting to see a decrease.
While the long-term impact on law firms will vary according to the area of law in which they practice, the report highlights uncertainty from law firm partners over the future of English law – particularly when it comes to cross-border transactions and commercial contracts. Survey respondents report the extent to which English law will be impacted as the preferred governing law of choice following Brexit will depend on factors such as the mutual enforcement of judgements between the UK and the EU.
Meanwhile, corporate lawyers’ workload will be affected by the extent to which inbound investment M&A activity drives changes in the UK and Europe if acquirers favour assets in Europe over the UK. In parallel, the impact on workload for banking and finance lawyers will be determined by whether arrangements for equivalence or regulatory convergence are put in place for companies to supply services between the UK and the EU.
German firms most prepared for Brexit, Italian firms lagging
The survey data show that 67 per cent of UK firms have already taken some action to prepare for Brexit.
Some 92 per cent of German respondents have taken some action to prepare for Brexit, significantly more than the average 68 per cent of firms across continental Europe. Firms in The Netherlands are also well prepared – 81 per cent of respondents have taken some action to prepare for Brexit.
In contrast, firms in France, Spain and Italy are less prepared. Only 63 per cent, 64 per cent and 50 per cent respectively of firms in these countries have undertaken some action to prepare for Brexit.
Brexit a catalyst for innovation
When it comes to meeting the anticipated increase in workload, the majority of respondents plan to hire more fee-earners while a significant number (more than 20 per cent) plan to invest in legal software, information and technology solutions.
“While hiring fee-earners remains the trusted solution for law firm partners in times of short-term demand, our survey interviewees report that Brexit will accelerate investment in technology, especially those that help firms update provisions in a huge number of contracts and documents,” said Leason. “This technology is being used to support more innovative approaches to service delivery, for example developing technology-assisted propositions for large-scale, bulk document review and repapering using AI technologies.”
About the research
Thomson Reuters asked law firm partners to consider the impact of a worst case, ‘no-deal’ Brexit scenario on the future of their firms. The results offer a broad insight into the range of potential challenges and opportunities that law firms face and reveal what firms are actually thinking and doing as part of their Brexit preparations.
The report “Catalyst or Catastrophe – how Brexit will impact law firms” is based on an online survey, conducted in December 2017 and January 2018, of more than 300 law firm partners based in the UK and Europe. To supplement the survey data, 15 interviews were conducted with participating law firms.
To download a full copy of the report, please visit: http://info.legalsolutions.thomsonreuters.co.uk/brexit-impact-law-firms