As the reality of Britain's vote to exit the European Union sank in among fashion brands, like London-based Burberry, on Friday, international law firms began sending out emails, warning actual and potential clients of issues that could arise due to "Brexit." Some set up 24-hour hotlines to field queries. But behind the marketing push, lawyers on both sides of the Atlantic said that any spike in advisory work might be short-lived and the long-term impact of Brexit on law firms could be adverse. The uncertainty that comes with it has the potential to sap business and threaten London's leading position in the global profession.
U.S. and U.K. firms dominate legal advisory work on large international transactions, and London has long been their European hub. In recent years, the promise of more work in the British capital has led firms from New York, Chicago and other U.S. cities to expand their presence in London.
Christian Leathley, a New York partner with British law firm Herbert Smith Freehills, said Brexit would likely produce an "initial flurry of activity" as clients raised questions about what it would mean for their business in the U.K. and Europe. But Leathley, whose firm has set up a Brexit task force, said there were still few clear answers.
"We're in a black hole," he said, noting the U.K. had adopted EU law in a host of areas, including public health, transport, competition, intellectual property and human rights. With Brexit, those laws will become "blank sheets of paper," and Parliament now faces the monumental task of passing new laws before Britain leaves the EU. Leathley said he thinks that will take years, possibly far longer than the two years envisioned for withdrawal under the EU treaty.
Tony Williams, a former managing partner of British law firm Clifford Chance, said the long period of uncertainty was bound to make international companies eyeing British investments think twice. "A certain level of [mergers and acquisitions activity] will be put on hold, possibly indefinitely," said Williams, who now works as a legal industry consultant.
Lucinda Low, the head of international offices for U.S. firm Steptoe & Johnson, which has an office in London, said there may be bright spots for some lawyers. She said the newly separated United Kingdom will need to negotiate new trade deals with EU nations. That will invariably increase regulatory red tape and complicate disputes, creating work for law firms with large trade practices, like Steptoe.
But she said she thinks the overall impact of Brexit on the profession is likely to be negative.
A major concern about Brexit is whether it will diminish London's status as a global financial hub.
Low said she believes London will remain an important trade and legal center, but said the economic climate ahead would be rocky. "I wouldn't expand in London now," Low said, "though I wouldn't pull out either." Williams said he thinks any advisory work Brexit produces in the short-term would be outweighed by the loss of work in M&A and other areas.
It was to handle such work in U.K. and across Europe that many U.S. law firms expanded in London, recruiting top local partners and even forcing British firms to compete with New York associate salaries. But Williams said that U.S.-led growth may come to an end as the London deal flow slows after Brexit.
"Most of these offices are now quite large and they need a certain number of shovelfuls of coal coming in to keep going," he said. "I think they will be looking hard at layoffs and redundancies."