Catherine Dixon, Law Society chief executive, outlines the Society's latest work on economic modelling of the impact of a possible UK exit from the European Union on the legal services sector.
'Legal services would be disproportionately disadvantaged compared to the whole UK economy if the UK were to leave the European Union'. This is the key finding of economic analysis that the Law Society commissioned from Oxford Economics.
We asked Oxford Economics to extend their industry-leading economic model to legal services to give us an independent assessment of the potential effects of a UK withdrawal on the legal sector, relative to the wider UK economy.
No previous analysis of the potential impact on the legal sector of a UK exit from the EU has been done. Against the backdrop of an impending referendum, we wanted to undertake research to inform the position so that solicitors have the information they need about the economic implications of an exit from the EU for legal services. We believe that this is important research and we have used it at political party conferences to demonstrate the economic value of UK legal services to the economy and to provide a unique insight into the effect that a withdrawal from the EU could have on our sector. We trust this research will contribute to the debate.
The researchers looked at three alternative scenarios - downside, central and upside. This was to take account of the range of uncertainty around alternative negotiated arrangements in the event of the UK withdrawing from the EU and the effect of greater UK autonomy over policy areas such as business regulation. In all three scenarios, economic output and employment growth rates in the legal services sector fall from baseline forecasts over the period 2020 to 2030. That is not to say that economic output and employment are predicted to shrink - only that the growth in these areas would be slower, and more so than the wider economy. It is important to point out that the analysis does not differentiate between different segments of the legal sector, and it is not saying that these effects would be felt uniformly by all firms, as the business impact of the EU obviously varies greatly across the sector.
In percentage terms, the negative effects look small, but in absolute terms, the analysis suggests that the volume of lost output for legal services could be as high as £1.7 billion in 2030. That is equivalent to the current combined annual UK revenue of Linklaters, Freshfields Bruckhaus Deringer, Clifford Chance and Allen & Overy (at 2011 prices).
As well as the Oxford Economics research, the Law Society has been talking to City firms to gauge their views on the implications of withdrawal, as part of a larger piece of work on the impact on the legal services sector of the EU and of a possible withdrawal.
Do look out for that report which will be published by the end of October. In the meantime, you can read the economic analysis on our website.