A hard Brexit could cost the legal sector up to £3bn by 2025, the Law Society has estimated.
This is despite a current increase in work preparing for the UK leaving the European Union.
Law Society president Christina Blacklaws warned that a hard Brexit could also have a “significant impact” on employment in the sector, with “lower growth and less investment”.
Forecasts released this morning from the society’s research unit showed turnover this year of £29.1bn under a ‘soft Brexit scenario’ – only £100m higher than under a Canadian style free trade agreement (FTA) scenario or a ‘no deal’ World Trade Organisation (WTO) scenario.
However, in 2019, the year of Brexit, the gaps open up. Under a soft Brexit scenario, legal sector revenue grows by 2.3% to £29.8bn. Under an FTA, the growth rate is only 1.3%, taking revenue to £29.4bn, while under a WTO it falls to -0.6%, with turnover shrinking to £28.8bn.
The following year predicted growth rates are 2.6% under soft Brexit, 1.6% (FTA) and 1.2% (WTO).
By 2025, the damage from a hard Brexit would still be obvious. The growth rate under a soft Brexit is estimated to be 2.1%, compared to 1.6% (FTA) and 1.4% (WTO).
Ms Blacklaws went on: “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.
“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 society’s research unit estimated that by 2025 employment in the legal sector could be cut by 4,000 to 5,000 compared to a soft Brexit in the event of an FTA scenario or 8,000 to 10,000 less under a WTO scenario.
Researchers said: “Brexit will have a significant negative effect on the sector in the longer term, even though the sector is benefiting from extra legal work in the short term.”
However, they said lower economic growth, even in a soft Brexit scenario, meant that employment in the legal sector was unlikely to show significant increases.
Total employment is predicted as falling from 323,000 jobs in 2015 to 311,000 by 2025.
“Also, over the longer term we continue to expect growth in total employment in the sector to be affected by the increasing adoption of new technology and new working methods.
“This means that by 2038, employment in the sector could be 20% less than it would otherwise have been.”