Where Does ‘Brexit’ Leave the Legal Sector in the United Kingdom?
European legislation is heavily implemented in the UK. The House of Commons Research paper ‘How much legislation comes from Europe’ estimated that around 50% of UK legislation with a significant economic impact originates from EU legislation.
Research commissioned by the Law Society and undertaken by Oxford Economics set out a bleak outlook for the legal sector following the United Kingdom’s withdrawal from the EU. The Law Society has estimated that up to £1.7 billion of annual legal services output could be lost by 2030.
This would be based on numerous factors including the removal of certain types of work (if the UK withdraws from the EU completely) and business and trade decreasing.
The effect on the legal sector will depend on what type of deal the government negotiate with the EU and the extent that the UK remain linked with the EU.
I will take a quick look at the proposed models for the UK’s exit:
- Complete withdrawal: This would result in a total exit from the EU single market, and EU legislation will not have effect in the UK.
- European Economic Area and the European Free Trade Association: This is the model currently used by Norway alongside other European (non-EU member) countries. The UK would have access to the single market, but would keep the principles of free movement of people, goods, services and capital.
- European Free Trade Association - the ‘Swiss model’: This would require the UK to negotiate trade deals with the EU and in return have some access to the single market.
If the UK completely withdraws from the EU, there will be a significant impact within certain practice areas. For example, the majority of Employment law comes from European Directives therefore a complete UK removal would leave the government with the chance to re-legislate from afresh.
Alternatively the United Kingdom may join the European Economic Area, which means although the UK would not be a member of the EU; it would adhere to central EU principles as mentioned above and in exchange it would have access to the single market. In this instance many of the EU base legislation would remain in force in the UK.
One area that concerns me is workers’ rights. EU derived employment law currently protects employee rights, for example, holiday and sick pay, maternity (and paternity leave) and the hours we are allowed to work. On the other hand, these principles now seem ingrained in UK business, and therefore may prove difficult to remove.
Other aspects of employment law that assert restrictions on employers may also be repealed for example TUPE Regulations.
Currently, a judgment obtained in a civil court in one member state is enforceable in other member states. This makes cross border litigation easier in the EU, as for example, a person with a judgment can enforce it in other member states by following a simple process.
If the UK completely leaves the EU, it would become much more difficult to enforce a judgment in the EU and the cost of doing so may become disproportionate.
It is unlikely that we will see the effect on the housing market until after the United Kingdom has officially left the EU.
The immediate smaller term effect resulted in a number of buyers pulling out of house purchases due to uncertainty about negative equity (if the house price fell below the amount outstanding on a mortgage) and the possibility that house prices may fall and they could save money further down the line.
What I believe is clear is that the UK did not have a clear strategical plan for this eventuality. The immediate aftermath of ‘Brexit’ saw our Prime Minister David Cameron resign as he was the leader of the ‘remain’ campaign.
The following weeks saw other high profile resignations. A strong advocate for the leave campaign and Prime Ministerial candidate Boris Johnson also resigned, followed by fellow leave campaigning MP (and MEP) Nigel Farage. It would surely have been beneficial for those passionate about leaving the EU to be involved in our exit?
The long term effect of Brexit on the legal sector is a relative unknown, despite the early warning signs regarding projected losses. The impact will potentially be felt greater by firms with direct involvement and business with countries in the European Union and those firms with European lawyers.
I believe that like many businesses in the UK, we cannot project what will happen as the UK has never faced this scenario and there is no precedent- no other major economy has faced this issue.
On the downside, financial transactions and contract law may become more difficult; however more work should be created in other areas e.g. immigration law. Further, there may be a rise in employee rights work, again depending on the model the UK adapts upon exiting the EU.
Many businesses still remain positive and a survey conducted by Mills and Reeve LLP across 217 businesses in the UK in July 2016 showed encouraging results. 82% of the businesses expected their workforce to remain stable or grow and 7 out of 10 businesses expected their revenue to grow in the next 12 months.
One thing is for certain- the UK’s exit will be an economic event that will be studied in years to come and extensive academic literature will follow. The impact of ‘Brexit’ will be studied in relation to the impact on politics, law and the economy in general.
We are living through history and the country and businesses need to pull together and embrace it with the hope that the UK can thrive in its new found independence.