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Growth in legal sector halved if Britain crashes out of EU, Law Society forecasts

Almost £3bn could be stripped from legal sector turnover by 2025 if the UK crashes out of the EU without a deal according to new economic forecasts released by the Law Society of England and Wales using alternative Brexit scenarios developed in collaboration with Thomson Reuters.

Law Society president Christina Blacklaws said: “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.

“Our econometric model predicts 2.2% average annual growth from 2019 – 2025 with a soft Brexit. This drops to just 1.5% with ‘harder’ Brexit options such as a Canada-style free trade agreement (FTA).

“If the UK had to fall back on Word Trade Organisation (WTO) rules – a ‘no deal’ scenario – growth would only be 1.1% per year on average over this period.”

These forecasts are generated by the Law Society research unit’s econometric model, which uses and builds on macroeconomic forecasts from the National Institute of Economic and Social Research (NIESR) and the IMF World Economic Outlook alongside Office of National Statistics reported data.

Christina Blacklaws added: "Lack of agreement on Brexit negotiations combined with volatile global markets mean that we’re standing on thin ice publishing economic forecasts just now, so we are reviewing our figures regularly and looking at a range of Brexit scenarios.

“Our intention is to provide projections that are useful to the sector, to business and government as they steer a course for the years ahead.”

“A hard Brexit could have a significant impact on employment in the sector, with lower growth and less investment in UK firms leading to lower productivity growth in the sector. Even based on a soft Brexit modelling our forecast suggests a steeper fall in employment than in last year’s forecast," said Christina Blacklaws.

Under the Canada-type free trade agreement, Law Society forecasts estimate that by 2025 employment in the UK legal services sector could be 4,000-5,000 less than it would be under a soft Brexit scenario. Under the WTO rules by 2025 employment could be 8,000-10,000 less than it would be under a soft Brexit scenario.

Christina Blacklaws said: “Shifts in employment are less certain than other figures in our forecast due to the range of Brexit scenarios and the effects of these on productivity.

“However, the law of England and Wales underpins a vast number of global transactions and will continue to do so for the foreseeable future. Our laws and jurisdiction are renowned the world over for their relative certainty, our expert judiciary and the professional competence and independence of both judges and practitioners."

Notes to editors

Headline forecasts for the UK legal services sector

Turnover (growth)

  Soft Brexit FTA WTO
2018 £29.10bn (2.1%) £29.00bn (2.3%) £29.00bn (2.3%)
2019 £29.77bn (2.3%) £29.37bn (1.3%) £28.84bn (-0.6%)
2020 £30.53bn (2.6%) £29.83bn (1.6%) £29.17bn (1.2%)
2025 £33.83bn (2.1%) £31.95bn (1.6%) £30.86bn (1.4%)

All figures adjusted for inflation back to 2010 prices (% growth figures in brackets)

Net exports (growth)

  Soft Brexit FTA WTO
2018 £4.14bn (11.5%) £4.10bn (10.4%) £4.10bn (10.4%)
2019 £4.37bn (5.6%) £4.23bn (3.4%) £3.85bn (-6.0%)
2020 £4.64bn (6.2%) £4.39bn (3.6%) £4.04bn (4.9%)
2025 £5.90bn (5.1%) £5.44bn (4.5%) £4.90bn (4.4%)

All figures adjusted for inflation back to 2010 prices (% growth figures in brackets)

Employment full time equivalent

  Soft Brexit FTA WTO
2018 286,531 286,750 287,002
2019 285,865 284,840 283,862
2020 286,241 285,437 284,474
2025 283,498 278,679 274,233

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