Ninety-six per cent of UK’s top law firms fear Brexit profit hit
Ninety-six per cent of the UK’s top 100 law firms say that Brexit could hit their profitability in the coming year, a survey published today showed.
The Thomson Reuters poll of finance directors at top 100 law firms showed that 42 per cent were worried that reduced inward investment in the UK could hit law firms profits.
Samantha Steer, director of large law strategy at Thomson Reuters, said: “The concern is less about a slowdown in deal flow ahead of a final Brexit – it is more that M&A and other inward investment does not then snap back to normal levels.
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“Transactional work feeds many other areas of law firms such as employment, IP and tax, which is activity in this area that is watched very closely by the finance teams at law firms.”
Chief executive of listed law firm DWF Andrew Leaitherland said Brexit was was already having an impact on deals.
“It already has [had an effect] in that from a transactional perspective we have seen a significant tail off,” he said.
The second-most frequently identified risk was uncertainty over free trade between the UK and the EU post-Brexit. Thirty-eight per cent of respondents identified this as a high-risk threat to profitability.
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Further Brexit issues identified as high-risk to law firm profitability include the potential negative impact on the UK’s financial services sector, legislative and regulatory uncertainties and law firm access to the EU market.
Twenty-nine percent of respondents identified each of these threats as high-risk.
Steer said: “The fate of the financial service sector and of the bigger law firms is very closely intertwined.”
Leaitherland said he hoped that a clearer direction on Brexit could help boost deal flow.
“If there is some clarity you may see some confidence come back to the marketplace. All that we know is there is pent-up demand in terms of transactional activity,” he said.
Only four per cent of the top 100 firms viewed the weakness of the pound as a major risk.
The collapse in sterling has actually boosted the profitability of the strong overseas office networks that many UK law firms have.