Reynolds: We won’t take PBS firms for granted any more
The UK legal sector is “a national asset and an engine of economic growth”, the government declared yesterday as it unveiled its 10-year Industrial Strategy.
It also promised to deliver a “clearer and more proportionate” anti-money laundering regime.
The strategy identified legal services as one of the “pioneering and world-leading frontier industries with the greatest growth potential” that it intended to prioritise.
The emergence of new technologies and proliferation of international rules “will continue to push innovators to the UK and its trusted legal framework to agree contracts and settle disputes, creating new opportunities for our gold-standard legal practices”, it said.
The sector plan for professional and business services (PBS) said the ambition was to ensure that, by 2035, “the UK will be the world’s most trusted adviser to global industry, with the most dynamic and productive PBS sector, remaining the world’s second largest exporter of PBS”.
In 2024 alone, it said, the legal sector contributed £42.6bn to the economy and posted a trade surplus of £7.4bn, employing around 384,000 people, almost two-thirds outside of London.
The sector was “foundational to the success of businesses nationwide”, while English and Welsh law governed 40% of global corporate arbitrations and approximately £20bn of mediation cases annually.
“The UK also excels in lawtech, boasting over 350 companies and attracting more than £5.5bn of investment in 2023. Our flexible legal services regulatory environment and ‘tech-neutral’ approach provide start-ups the space to innovate.”
But the legal sector “nonetheless faces barriers to growth”.
The plan said: “There is a pressing need for technology and AI upskilling across the workforce to keep pace with advancements. SMEs in particular struggle with technology adoption and capital for R&D investment.
“Market access abroad is challenged by business mobility restrictions and practice barriers. Investment in the physical state of courts and addressing court backlogs is important for investor confidence and business efficiency.
“Modernising court infrastructure to include digital tools, such as AI and advanced case management systems, can enhance the operation of courts and secure the UK’s leadership in specialist areas.”
To achieve this, the government recognised the importance of “a well-functioning civil justice system” and said the Ministry of Justice (MoJ) was exploring “targeted reforms” to streamline dispute resolution.
Digitalising the system “represents a major economic opportunity”, making the work of the HM Courts & Tribunals Service reform programme and progress towards completing the digitalisation of the jurisdiction “vital”.
There was no mention that the court modernisation project ended in March with only 23% of civil cases being digital end to end.
The plan said the final features for the Online Civil Money Claims and Damages services would roll out in 2025/26, while the MoJ was testing online tools and services that support greater use of early and online dispute resolution.
“This work is initially focussed on developing online services in the family jurisdiction, but the approach can be scaled across the civil, family and tribunal system.”
The plan trumpeted the government’s continuing support for LawtechUK – since its inception in 2019, the number of UK lawtech ventures has grown from 110 to 376, nearly a third of which participated in LawtechUK programmes.
The plan pledged continued support for the international reputation of English and Welsh law – pointing to this year’s Arbitration Act and the Digital Assets Bill, which would provide “certainty over legal issues around digital assets, helping to make the UK a global cryptoasset hub” – as well as “unequivocal support for the rule of law”.
The UK was among the first signatories to the Council of Europe’s Convention on the Protection of the Profession of Lawyer, while the International Rule of Law Programme shares best practice with other jurisdictions.
The government said it would support legal services regulators “to drive sectoral growth through opening up and shaping priority growth markets to bolster UK legal services trade”.
The plan recognised the importance of ensuring the Money Laundering Regulations (MLRs) were “clear and proportionate to the risks”.
Before the end of this year, HM Treasury (HMT) will “bring forward a package of changes to the MLRs aimed at improving their effectiveness”.
“We also recognise the significant potential for new technology such as digital identity to streamline checks and processes for firms and customers.
“As part of the government’s commitment to reducing the administrative costs of regulation for businesses by 25% by the end of this Parliament, HMT will take steps to encourage the use of digital identity for MLRs identity verification checks and has consulted on the need for clarifying guidance for regulated sectors.”
Other initiatives in the plan included securing recognition of professional qualification agreements with “key partners” and increasing opportunities for PBS firms to join government-led trade missions.
The wider strategy also promised to develop a Smart Data programme focusing on the property sector to improve data sharing across the industry.
Business secretary Jonathan Reynolds said: “PBS are now at an inflection point. Artificial intelligence and new technology offer the opportunity to improve productivity but also the potential to disrupt long established systems and ways of doing business, and to fundamentally reshape the sector and PBS firms’ business models.
“The future success and global competitiveness of the sector will require government and industry to work together to secure the talent and invest in the systems and training necessary to deliver our ambition for the UK to be the world’s most dynamic and innovative PBS centre by 2035.
“For that reason, the UK government has, for the first time ever, chosen to put PBS at the heart of our modern industrial policy.
“No longer will we take our first-class PBS firms for granted. Instead, we will actively champion them and ensure that we unleash the growth potential in one of the jewels in our national crown.”
Law Society president Richard Atkinson said the strategy could be “a game-changer” for the UK economy and the legal sector.
“Putting legal services at the heart of the country’s economic engine can fuel sustained growth,” he said.
“The new strategy prioritises technological innovation, aims to open global markets and upskill English and Welsh lawyers. If coupled with the investment we will need in the courts infrastructure and across the justice system, the strategy could deliver sustained growth in the sector.”
A very insightful post highlighting the vital role of legal services in national growth. Appreciate the clear focus on its contribution to the industrial strategy.