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Legal market growth forecasts revised downwards as research finds it contracted in 2016

Legal market growth forecasts revised downwards as research finds it contracted in 2016

The value of the UK legal services market fell last year and there will only be modest growth over the next two years, with uncertainty over Brexit a contributing factor to researchers downgrading their forecasts.

The seventh annual edition of the UK Legal Services Market report put the legal market in 2016 at £31.5bn, down from £32.2bn in 2015. It said that while large law firms have continued to see revenue growth, it has been in the medium and small law firm sectors where revenues have been hit.

It said the UK's decision to leave the EU could have both a positive and negative effect on the legal market. On the positive side, it is likely to require substantial reworking of UK law which may require companies and public bodies to consult with their lawyers to assess the changes that may result. In particular, firms exporting to or with operations in the EU are likely to require substantial legal advice on the implications of Brexit and the type of Brexit that may result.

In addition, the devaluation of sterling is making UK law firms' costs look much cheaper than they did before the Leave vote, which could boost overseas work.

However, Brexit could make it harder for UK firms and lawyers to operate in the EU, while London may lose its appeal as a centre for international arbitration and corporate work. Large corporations have already received flyers from law firms in Singapore, Hamburg and Paris, among other European cities, suggesting that they move their legal representation overseas. US firms may also restructure their European operations moving some lawyers into the EU.

Report predictions:

  • The legal services market would grow by around 3% in 2017, with growth picking up to 4% in 2018 and then being around 5% per annum from 2019 to 2021
  • By 2021, the turnover of legal services companies could reach £38.8bn - 23.5% larger than in 2016
  • In the next year or so, law firms are likely to continue to look more closely at controlling costs while more law firms and legal services providers will explore options such as unbundling of services and a contractor role in B2B legal markets

Source: Legal Futures

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