Is it really that bad? Business is going well, the weakness of sterling is benefiting UK service industries and law firms are seeing new instructions as companies, banks and individuals try to work out the legal implications of Brexit.

However, there is an icy chill in the air. One can feel the temperature falling as trainee numbers are cut, firms look for merger opportunities and partners have a sense of unease about the future.

The problem is that law firms have multiple challenges, not only legal and regulatory, but also commercial. As firms rushed to requalify lawyers in Ireland, it became apparent that the practice of law is complex and requires many freedoms to continue to exist in its current form.

We take it for granted that a UK lawyer based in London can attend a meeting in Frankfurt to advise a French bank on a Spanish motorway finance deal. But if we stop and think about that sentence, it becomes apparent how many freedoms are actually involved in what we do: the lawyer has to have the right to practise law in their home country, Germany has to recognise that right for them to advise the client, the French bank is in Germany through its EU passport.

Everyone there will have travelled to the meeting. The lawyer is insured through a European insurer that is probably passported. The documentation will be subject to English law and any conflicts of laws will be governed by EU law. The lawyer will send an invoice in euros, which will be VAT-free. There will be no other sales tax. The bank will be able to take profit from the Spanish project without there being withholding tax on dividends in Spain… and so on.

So how does a law firm survive Brexit? The first part of the answer is entirely legal: by using EU-qualified lawyers, preferably with EU nationalities, acting through EU entities and being insured and regulated in the EU. My own firm Euclid Law recently merged with EDGE Legal – a Belgian entity. The merger had a strong strategic rationale. It also protects us against Brexit as we can now provide advice out of a Belgian-regulated entity. Our rights of audience in front of the courts in Luxembourg will be safeguarded as well as the all-important privilege position.

The more difficult challenge is commercial. If one looks at Switzerland, its law firms typically provide Swiss law advice. They are not represented in Brussels, even if they have strong competition law practices.  The reason for that is simple – clients will not go to Switzerland for EU law advice, or indeed EU competition law advice. Switzerland is simply not perceived in that way.

Such a situation will not be a problem for older partners, who have established reputations in Brussels and in London. However, the younger generation will grow up more UK-centric as clients increasingly go to EU-based firms for EU advice. That will not just be a problem in our area of practice, but in any area that is strongly influenced by EU law. It will be imperative to get the younger lawyers on secondment into the EU and to use that opportunity to qualify them there.

In that context, the relevant directive will no longer apply, so it is likely that they will need to take additional exams, usually in a foreign language. That means that the profile of the UK solicitor will change over time – some will become more insular, some more international. A second nationality will become a valuable asset.  

No article on Brexit would be complete without a few words about the Solicitors Regulation Authority. No country regulates its law firms in the way that we do. We have a mind-boggling regulatory system. Principles-based regulation is as clear as mud. Every solicitor in England and Wales needs to carry highly specialist insurance that includes run-off cover for six years, even if no premiums are paid during that period. That means the cover is expensive – much more expensive. The UK insurance cover for my firm costs four times as much as the cover for an equivalent EU firm. So why stay in the UK? It is a serious question for firms that are at the tipping point of having more EU work than UK work.

It would be perfectly possible to work within the overseas practice rules and not carry the expensive insurance cover. Over time, firms may migrate entirely and rely on outsourcing English law aspects to specialised barristers. There will be no sudden exodus. It will be a gradual loss of talent, firms and expertise. It is incumbent on the Law Society and the SRA to recognise that risk and to act now before it is too late.

How we react in the next 12 months will be crucial to the survival of the profession and of the UK law firm. At my firm we are prepared for the future, whatever it may be. Is your firm prepared?

Oliver Bretz is founding partner of boutique competition firm Euclid Law