The recent Legal Services Sector Forecast report, published by The Law Society, indicates that the sector will enjoy a brief buoyant market, followed by a sustained slowing of growth.
The short-term predictions look optimistic for legal service companies as 2018 real turnover of £29.1 billion indicates a 2.1% increase on 2017 figures of £28.5 billion. Similarly, 2019 figures are set to rise to £30.5 billion, a further increase of 2.3%. This trend peaks in 2020 with a predicted turnover increase of 2.6% from 2019 figures.
The Law Society comment: “The Law Society’s estimates of the growth in real turnover (the measure of the volume of work done by the legal sector) for 2017 to 2020 remain relatively buoyant. This is due to increasing amounts of work relating to regulatory changes arising from Brexit, the relative buoyancy of work for law firms from UK businesses in 2016/17, and increased work for non-UK clients following the depreciation of the pound’s exchange rate.
“However, in the medium-term we expect real turnover growth to slow down, due to weaker performance of the UK economy, slower growth in exports of legal services, and also the slowdown in the housing market affecting conveyancing work. Real turnover growth in the sector will still be higher than growth in the economy as a whole, with continuing work relating to regulatory changes after Brexit being a significant factor, but overall growth in the sector will be significantly lower than rates seen in the past.”
Following a medium-term reduction in turnover, the amount of legal service professionals in the sector will also be compromised. The report highlights potential decreases in the total employment of full time legal service professionals in the future. The Law Society attribute these potential changes to Brexit issues and speculative proptech technology that could replace some existing jobs.
Total full-time employment in the sector has seen incremental decreases in the last two years with 2016 levels of 295,605, falling to 290,531 in 2017; a reduction of full-time legal sector workers of 1.8%. A further 1.3% of legal service professional jobs were cut in 2018. The 2018 figure of 286,865 is set to reduce further to 286,103 by 2021.
Based around predictions concerning total employment, The Law Society state: “Our headline forecasts assume that there will eventually be a relatively soft Brexit. However, lower overall economic growth, even in the soft Brexit scenario, means that employment in the legal services sector is unlikely to show any significant increases (despite some additional work for the sector due to Brexit).
“We expect total employment in the sector to fall from an estimated 323,000 jobs (293,000 full-time equivalent jobs) in 2015, to 311,000 jobs (283,000 full-time equivalent jobs) by 2025. Also, over the longer term we continue to expect growth in total employment in the sector to be affected by the increasing adoption of new technology and new working methods. This means that by 2038, employment in the sector could be 20% less than it would otherwise have been.”
Anxieties for the housing industry look like the only thing set to rise as estimates on housing transactions also show a considerable percentage reduction over the coming years. The 2018 figure stands at 862,226 housing transactions, this will be down 3.5% on 2017 figures.
The statistics for 2019 and beyond also bolster the opinion that the legal services sector will shrink in recent years. 840,000 housing transactions are predicted in 2019, a decline of 2.6%. These figures hit a worrying low in 2021 with the 786,232 housing transactions a 4.8% reduction from 2020 figures.
The Law Society have said: “Housing transactions have been slowing down significantly since the beginning of 2018, as there has been little or no increase in people’s real incomes, and while the rate of increase in house prices has fallen in most parts of the UK, prices are still high relative to average incomes. With slower growth in the UK economy and still little sign of significant pay increases, we therefore expect housing transactions to slow down in the short-term and remain depressed over the medium-term.”
The real term implications of Brexit will worry many legal professionals in the sector. Continued curtailments in housing transactions, turnover and ultimately staff levels will create a shrinking legal services economy that will only put increasing pressure on professionals.
Does a reduction of 90,000 housing transactions worry conveyancers? Will conveyancers struggle to operate in a shrinking economy? What are the implications for legal service professionals?
