Law Firm Professionals React to Brexit

29 Jul 2016

It’s been over a month since Britain decided to leave the European Union and there’s been a mixed widespread reaction from businesses in the legal market.

Here’s what our Chairman Phil Jepson had to say on the aftermath…

“When I switched on the TV at 4.30am on 24th June I was absolutely stunned to see what was happening in front of me. My sense is that many business people and politicians felt the same way.

What followed was days of huge political and economic uncertainty. I had flashbacks of 2008 and Britain stepping off an economic cliff.

The Prime Minister announced his intention to resign and the spectre of a transatlantic horror film starring Boris Johnson and Donald Trump loomed large.

The currency fell like a stone. Stock markets crashed. There was lots of talk about repentant “out” voters wishing they could vote again.

Against that background how could business go on as usual and who could plan for the future?

We all had to take a breath and wait and see. 

Then sanity started to return.

The Conservatives resolved the leadership question in days, rather than the weeks or months we thought it would take. A new Government was installed. The Bank of England calmed the markets. Everyone began to realise that although we had committed to change we had not committed suicide.

We started to breathe again. Slowly, cautiously, but we are breathing.

There is no doubt that some corporate and property deals were put on hold. Some of those are now going ahead. The funding that people need is still out there and banks are keen to lend. There is still caution around some longer term projects but in the short term banking lawyers, real estate lawyers and corporate lawyers are still busy.”

We thank Phil Jepson for his wise words there. There has been extensive coverage of Brexit in the media, both leading up to the vote and subsequently. The majority of law firm leaders have had their say, not only regarding what the immediate effects have been to their business, but also what they predict will be the short term, medium term and long term effects. Granted, much is still uncertain and therefore their opinions may indeed change over time. Yet, we have proceeded to provide a summary of a sample of law firm leaders collective opinions.

Opinions from the Top 50 UK Law Firms

“Uncertainty and change is generally good for lawyers. I’m not saying it was a positive development, but for us it is business as usual.” – Michael Ward Chief Executive, Gateley

 “Brexit has brought uncertainty to the business world and the legal sector is no different. The most immediate effect we have seen is that clients are responding to this uncertainty – looking for advice and guidance in this unprecedented situation. Just as we prepared for the reality of a Brexit as a firm as much as possible, we also researched the implications across the different sectors and legal areas that will affect our clients.

That has been helpful but there is still much that is unknown and these conversations will continue for the foreseeable future.

Brexit is now a critical part of our business planning, we have international alliances with firms in the US and in Germany who have different considerations to our UK clients and we are having conversations with those firms to see what we can do to assist clients that we work on together.

The impact on the legal sector will be largely led by the impact on the wider economy. To mitigate the negatives around the uncertainty and the lengthy negotiations that will need to take place the UK government needs to steady the ship and reassure the UK that business as usual is possible and that there will be opportunities in a Brexit as [well as] change.” – Jonathan Blair, Managing Partner, Bond Dickinson

“‘Uncertainty’ is the most used expression in the news currently and that reflects what we are hearing from clients. We have seen some deals being put on hold while further consideration is given to future scenarios… The waves that Brexit is causing aren’t affecting us in isolation – but everyone else too, our clients and other law firms. There is a uniformity in this situation.

Communication is key, both internally and externally. We are listening to clients and working with them to support them during this period of political and economic flux. We are sharing what is happening in the market with our internal leadership team to ensure we can remain agile and responsive with our business plans. We are a very broad based firm so different parts of our business may be affected to varying degrees by any change in the economy. Some areas

will remain untouched and others will see work flows increase which may balance any slowing in our transactional work.

It is possible that as a result of a Brexit, some firms may have to consider opening an office within the EU that will allow them to continue practising certain types of law.” – Peter Duff, Chairman, Shoosmiths

Uncertainty associated with Brexit is uniform across the top 50 UK law firms, therefore it seems that for the most part, these firms are trying to proceed business as usual. There is clearly a lot of concern for clients and international alliances, and there is a lot of a ‘wait and see’ type attitude. In addition, the importance of planning and future proofing has been expressed as key. In general, there have been deals which have been delayed but not many which have been put off completely. 

Many UK firms have looked to opening an office in Ireland to retain their EU presence. Eversheds’ consultancy arm Eversheds Consulting recently lost a client pitch to an EU-headquartered firm. The client (A German ‘diversified industrial manufacturer’) told Eversheds Consulting that other rival firms won the work because of their EU presence. 

Overall, firms in the UK top 50 are positive about the situation and are being proactive to protect themselves going forward.

Opinions from the Top 51 – 200 UK Law Firms

Similarly the top 51 – 200 UK law firms describe a focus on strategy and particular sectors of their business:

“There is a degree of uncertainty and undoubtedly people have been putting off some deals to see how things play out. There has been a slight reduction in activity but not too much. The legal market has been so changeable that we already adapted our business to be more flexible and entrepreneurial and had been planning for a downturn. If anything we have speeded up our plans a bit. In the short term there may be some firms that face difficulties. The whole industry faces a challenge in adapting to the result.

Those that can adapt quickest to the way the negotiations turn out will prosper in the medium term.” –  Geraint Davies, head of litigation and board member, Howes Percival

“We have experienced a real upsurge in the level of immigration enquiries. Many clients employ significant numbers of EU migrants in a variety of roles. We have been working with them to develop strategies to reassure these individuals and to start the process of applying for permanent residence in the UK wherever possible. Otherwise, many employers are concerned about the impact of Brexit on their European Works Councils and on the new General Data Protection Regulations (GDPR)… In the medium term, we will ensure that we continue to have lawyers who are qualified in each jurisdiction within the UK so that, if the latest developments result in a divergence of employment laws across the jurisdictions, we will remain well placed to advise.” – Karen Baxter partner, Lewis Silkin, London

It probably doesn’t come as much of a surprise that immigration law has seen an increase in activity. Law firm clients are understandably concerned about their EU migrant employees and want to regularise as many of their European staff as possible. It is fairly unanimous that Brexit has affected and will affect different sectors in different ways. Those which displayed increased activity or are predicted to increase include: immigration, employment, civil litigation and restructuring. Those which declined or are predicted to decline include: property (especially in London), EU IP, international commercial and corporate acquisitions.

Opinions from Smaller Firms

Local firms haven’t seen much change since the referendum, being that their clientele are mostly local private individuals:

“The prospect of Brexit has not affected Anderson Rowntree as we are a general high street practice offering property, private client, family and litigation services mainly to private individuals in our local area.” – John Dickerson practice director and partner, Anderson Rowntree Chichester

“Any funding Cornwall loses from the EU will, I suspect, be replaced by the UK government. Cornwall also has much to benefit from lower exchange rates in attracting foreign and domestic tourists. Farming will benefit a lot from more competitive produce.

The biggest threat for us is lack of lending activity to clients. After the 2008 crash banks shut their doors. They like lending to rural businesses less than to those in cities, as it is slightly more marginal and less profitable. A clampdown would have a disproportionate impact on rural practices.” – Mark Parnall, director, Parnalls Solicitors, Cornwall and Devon

Like the bigger law firms, smaller practices are very much dependent on the economic and political environment in the UK. However, small firms have less of a cash security blanket to wait out the storm. If the market comes to a stand still, it is the bigger firms that will survive. 

Evidently there has been a reaction to the Brexit within the legal market. However, whilst uncertainty is likely to continue to cast a shadow over Britain for the next couple of years, it is unlikely we will see any monumental changes to law firms any time soon.