By Saif Ullah, Researcher in the City of London Research Team
Last night (5/07/17), the Lord Mayor hosted an annual dinner for HM judges at Mansion House. The dinner is an opportunity to recognise the world-renowned status of UK judges and the huge contribution this profession makes to the UK economy, with prominent figures such as the Lord Mayor, Lord Chancellor, and Lord Chief Justice in attendance.
To mark the occasion, I thought I’d take a closer look at the legal services sector in the UK, and in particular illustrating its importance and contribution to both the City and wider UK economy, as well as looking at some of the challenges facing the sector in light of Brexit.
Value to the UK economy
Legal services play a major role in the economy in terms of the number of people they employ, their contribution to GDP, exports and the UK’s trade surplus, as well as making the UK an attractive place to conduct business. Around 306k people are employed in legal activities across Britain, with over 100k people employed in this sector in London (2% of London’s workforce).[1] The Law Society estimates that nearly two-thirds of those employed in legal activities are solicitors.[2]
In terms of economic contribution, in 2016 legal activities added £24.4bn to the UK’s national accounts, around 1.4% of the UK’s total GVA.[3] The legal services sector also makes an important contribution to the UK’s trade activity – in 2015, UK legal activities (made up of law society, legal services, and commercial bar association services) amassed exports of around £4.1bn, and contributed a trade surplus of £3.4bn.
Role in the City
Legal services are considered integral to the effective functioning of the City’s business ecosystem. Over 41k people are employed in legal activities in the City itself, around 9% of the City’s total workforce. [4]
Legal service activities have been closely tied to those in financial services (FS), the City’s predominant sector. Financial services firms require a range of enabling legal services, such as the development of contracts, broader advisory and project and deal structuring services, as well as dispute resolution services. This level of demand from FS was reflected in a recent study published by the Law Society, which found that the share of demand from financial services (17% of total business demand, or £2.8bn) was more than three times that of the next largest external source, the construction sector (5%, or £919 million).[5] Growth in regulation and the necessity for City firms to acquire legal advice has seen a rapid rise in the use of solicitors in the Square Mile, with more than a fifth of all practising solicitors working in City-related functions, and the number of solicitors in these areas has increased by 60% over the past 10 years – double the rate of growth in other areas. [6]
Challenges post-Brexit
Some bodies have expressed concern that any impact of Brexit on the UK’s financial services sector could have knock-on implications for legal services revenue, given the close links between the two sectors.
Other challenges include UK legal services’ future access to the EU market (such as whether UK lawyers will be able to practice freely across member states, and the ability of law firms to recruit skilled staff from the EU), and the transfer of EU law into UK law. The International Regulatory Strategy Group – a joint venture of the City Corporation and TheCityUK – as well as bodies such as The Law Society and The Bar Council, have been particularly vocal in ensuring that the importance of the UK’s legal services sector is recognised and its voice is heard at the negotiating table.
Despite these challenges, the UK remains a leading destination for international business to carry out its legal affairs, largely owing to their preference to use English Law but also due to the world-renowned status of English judges. Last night’s (5/07/17) dinner provided a timely reminder of the critical importance of UK legal services and the role of UK judges in supporting the economic prosperity of the economy.
[1] ONS, Business Register and Employment Survey 2016
[2] The Law Society, Economic value of the legal services sector, 2016
[3] ONS, UK Quarterly National Accounts, Feb 2017
[4] ONS, Business Register and Employment Survey 2016
[5] The Law Society, The Economic Value of the Legal Services Sector, March 2016
[6] TheCityUK, The Impact of Brexit on the UK-based legal services sector, 2016