How the referendum result will impact the legal market, and what law firms can do about it
Analysts are predicting that the United Kingdom is likely to fall in the Economic League Table as a consequence of Brexit. The uncertainties that the decision has created will lead, and have already led, to an anxious corporate world. But what will the effect of Brexit on the corporate and legal markets be?
The fall in the Economy League Table is predicted to demote the UK as a leading global economy in place of France by next year. Though recent stats on GDP have shown no sudden fall in the UK economy since Brexit, it is speculated this will change over the next economic year.
So, how is this affecting corporations?
Well with the uncertainties surrounding the state of the economy and the threat of a possible recession, companies are less enthusiastic to invest in their strategic plans. A reduction in company spending leads to a reduction in growth and significant inflation. This in itself will have a significant effect on the UK’s economy. The value of the pound since the UK’s decision to leave has been catastrophic, with its value reaching lows last year that were not expected. Businesses are now having to rely on the change in currency rates to predict their long term international and national trade values.
Trade is another area expected to affect corporations as a consequence of Brexit. The EU has a free trade system and international dealings with the likes of America.
By leaving the EU, the UK will be subject to possible import and export taxes on their goods. This does not gel well with the possibility the UK will be required to determine new trade deals outside the ones within the EU. These deals are not small things and if they are not complete come the point the UK officially disembarks from the realms of the EU then the economy and trading industry could come under heavy stress.
The UK economy is not the only Brexit issue; it has been speculated the leave vote has sparked a chain of events which has left the European community unsure of its future.
France, for example, is a likely contender to take the next step to leave the EU, which will in turn lead to an uncertain EU. It will be vulnerable to collapse due to its financial instability as global superpowers begin to leave.
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Worrying signs of slowing economies worldwide — like China, Brazil and Russia — have led to corporations becoming nervy about their decisions to expand and grow. The fear of a worldwide recession is something which is very unlikely to happen. However, the state of the world’s economy and the power being held within less western states is leading to a shift in the normalities of the corporate world.
How does this affect the legal market?
Well, the legal market superpowers are based within corporate law. The clients of corporate lawyers are businesses. If these businesses are affected by Brexit, you can bet that law firms will be as well.
The legal market is likely to be impacted dramatically because of work available to firms. If clients are not spending money and have no deals that they want closing, then this leads to a reduction in the workload of corporate lawyers. This then influences law graduates; with a reduction in the corporate market requirements, law students are less likely to be offered training contracts.
Another area in which the legal market will be affected is free movement. It is predicted many corporate firms use the UK to litigate international trade dealings. Whether lawyers will still be able to represent clients on international dealings or address in a European court is still unknown. With the possibility of a reduced access to the EU market for UK lawyers looming, a lot of clients and corporations will move outside of the UK. This in turn will significantly affect the UK economy given the reduction in corporation taxes coming in.
So, how can law firms ensure they stay a step ahead of the consequence of Brexit?
There are two things that law firms must certainly do, the first being associated with their clients and the second being associated with their growth.
Many corporations will be on edge and unsure of their financial future; what they are going to need is their lawyer. The key to success in this situation is all based on the lawyer and client relationship.
Secondly, we look at the recent merger of Eversheds and Sutherland Asbill & Brennan. A merger of law firms comes about for one of two reasons: for financial stability or for growth. In this case, we can speculate that it’s a bit of both but mostly international growth. The merger will allow the firms a larger international client base and offer a greater financial budget for further developments that the firms wish to do.
The UK economy in its current state is steady, but the future as predicted is not so bright. However, the solution is to just keep going: if you stop growing, stop investing and stop being brave you don’t get anywhere. You may well be financially stable for the time being but corporations need to grow, expand and get bigger to compete with rivals; if UK corporations don’t do this they will be overtaken by international corporations leading to further economic problems. If the legal market does not expand and grow then firms will be overtaken, become financially unstable and be dropped by clients. What is the real future of the UK economy? A question for all corporations and lawyers.
James Wright is a second year law student at Keele University.