Law firms operating in the UK will fall behind firms in foreign markets unless specific regulatory burdens are lifted, according to government officials and law firm chiefs.

In its first report, submitted to Chancellor Alistair Darling this week, the Professional Services Global Competitiveness Group (PSGC) urged the government ‘not to over-react to adverse economic conditions, by proposing proportionate law regulation and giving full consideration to the effect of proposed changes on all market counterparties.’

The PSGC encouraged the government to continue to apply pressure to open legal markets overseas.

It also called on the Solicitors Regulation Authority to allow lawyers from India and China, among other jurisdictions, to requalify in England and Wales under existing qualified lawyer transfer regulations. The report said this would ensure there is sufficient talent to fill jobs as the UK’s birth rate falls.

The group noted calls for a separate regulatory regime for large commercial firms and smaller high street firms, which is currently being considered as part of the Law Society’s ongoing regulation review.

The PSGC was set up in September 2008, and is co-chaired by financial services secretary Lord Myners and Sir Michael Snyder, senior partner at accountants Kingston Smith.

The legal profession is represented by David Cheyne, senior partner at magic circle firm Linklaters; Mark Dawkins, managing partner at City firm Simmons & Simmons; Stuart Popham (pictured), senior partner at magic circle firm Clifford Chance; and Bruce Buck, managing partner at US firm Skadden.