What Does Brexit Mean For Law Firms?
Gill Ringland was invited by a forum of Financial Directors from the top 100 law firms to lead a discussion on Brexit at their recent meeting held in Birmingham. The four tables of attendees first chose different areas of law to focus on: Corporate, Private Clients, Real Estate and Data Protection. Gill then explained the Three Horizons methodology and the concept of scenarios.
The groups were then invited to consider the three different scenarios of the UK’s relationship with the future EU that we’ve discussed in this blog previously – being similar to the relationships to the USA that Canada, Mexico and Cuba in 2000 had. In effect these are on a continuum of friendly, through wary to distant.
All four groups identified short term uncertainty as affecting decision-making in all three scenarios – a potential opportunity for law firms.
The Canada scenario was thought to affect location of HQ’s in the Corporate sector and the rate of investment and M&A, and over time impact supply chains. Cross-border tax issues also affected private clients, with real estate being affected by exchange rates and the movement of labour. There were concerns over different layers of data protection regulation and the impact on the “safe harbour” rule, but in this scenario a convergence of regulation over the long-term was expected.
In the Mexico scenario, however, law firms needed to demonstrate expertise in both EU and UK data protection regulation, and were likely to have to open offices in the EU. High-flier private clients might themselves move – say to Dublin – as residency issues arise and so law firms might need to follow. Concerns about the break-up of the UK become stronger in this scenario. The Corporate sector would face currency and supply chain issues and may start to substitute markets, looking to do new things with new partners.
The Cuban scenario is a more extreme version of Mexico, with higher property prices, returning Britons, and changes in business culture leading to a more buccaneering approach, but with dangers of a brain drain. Private clients may be concerned about finding opportunities to avoid red tape and compare tax regimes, but non-doms may be looking for an exit strategy. Data protection regulation could be less onerous and more flexible, though may need to converge with those of new trading partners like Australia, India and China – law firms would need to build expertise in those regimes.
There was a general discussion about the effect of uncertainty. The idea of planning for the worst case, regarding others as upsides, was rejected because of the danger of it becoming a self-fulfilling prophesy by inhibiting investment. The need was for flexible, adaptable, multi-layered approaches. Law firms should stay closer to their clients to track their attitudes as change emerged. This in itself would provide an opportunity to engage with them and offer a wider range of services. Gill gave the example of Allen & Overy who had used a scenario planning exercise as a way of engaging at more senior levels with their clients.
In all the scenarios it would be advantageous to strengthen global contacts, look at ways of cross-selling and actively seek out new opportunities, rather than waiting to see what happened. New technology should be leveraged and, with the onset of AI replacing even non-routine tasks (as described by Susskind), firms should look to make a wider use of their talents of empathy and understanding.
Written by Huw Williams, SAMI Principal.
The views expressed are those of the author and not necessarily of SAMI Consulting.