A British exit (Brexit) from the EU would cause legal services to be ‘disadvantaged disproportionately compared with the UK economy as a whole’, a study published by the Law Society claims.
The independent economic analysis, by research firm Oxford Economics, was published last night ahead of the major political party conferences. It concludes that the legal services sector would suffer from Brexit because of the sector’s reliance on demand from financial services which it says are likely to be adversely affected by a UK withdrawal. It would also be hit by what the report says would be ‘subsequent lower levels of business investment’.
A referendum on UK membership of the EU must be held by the end of 2017. According to the study, UK withdrawal would start to affect economic drivers In 2020. By 2030, in the worst of three scenarios presented, the annual output loss for the legal services industry would be £1.7bn in 2011 prices, equivalent approximately to the current combined annual UK revenue of Linklaters, Freshfields Bruckhaus Deringer, Clifford Chance and Allen & Overy.
The economic model presumes that Brexit would lead to an increase in external trade tariffs, reduction in foreign direct investment and a fall in inward migration.
It concedes that as historically the UK has been a net contributor to the EU budget ‘withdrawal should have a positive impact on the fiscal balance, other things equal’.
The Society said the report ‘begins our contribution to the national debate’. A more detailed report in mid-autumn will look at the EU and the legal sector, the potential business impact on the UK legal sector of British withdrawal and the EU's impact ‘on specific areas of law and associated rights’.