European integration was the bedrock for City law firms’ dramatic globalisation during the 1990s and 2000s but yesterday’s shock vote on the European Union referendum has sent shockwaves through the nation and the profession.
As prime minster David Cameron (pictured) resigned amid dramatic falls in sterling and UK stock markets, law firms were flooded with client calls as they attempt to work their way through the torturous logistics of unpicking the UK’s 43-year relationship with the EU.
Once the dust settles, UK and US law firms will have to take a view on the long term prospects for the City and their own investments, threatening London’s once-unchallenged position as Europe’s dominant finance and professional services hub.
Commercial lawyers had been among the strongest supporters of remaining in the EU, though they are currently likely to profit from a decade-long stream of Brexit-related work. Given the huge European practices they have already built up – London’s big four all generate well over half their revenues outside the UK – top City law firms are already heavily hedged. There will be an early focus not only on London’s status but also the international currency of English law, which has until now been one of the strongest assets for UK-bred law firms.
The Leave campaign won 52% of the vote, with more than 17,400,000 votes at the latest count while Remain achieved 48% and just over 16,100,000 votes in the vote on 23 June.
This morning (24 June), Cameron announced he would resign in three months, saying: ‘I do not think it would be right for me to be the captain who steers the country to its next destination’. There is already pressure on Labour leader Jeremy Corbyn after a lacklustre campaign from the UK’s main opposition party was followed by a heavy Leave vote in England’s industrial heartlands. Political uncertainty will further ramp up concerns for the UK economy in the months ahead with the Brexit vote coming without a defined exit strategy. The pound plunged to a 30-year low – having reached $1.50 last night when polls suggested a win for the Remain camp.
Senior City lawyers have spoken out about the potential impacts of the vote on financial markets, the British economy and legal sector.
Nick Elwell-Sutton, an employment partner at Clyde & Co, warned of heavy cuts in the financial services sector. ‘Unless the financial services pass-porting rules are resolved in the UK’s favour, then many large financial services businesses are likely to relocate to within the EU, meaning large scale redundancies would be highly probable.’
Lord Goldsmith QC, a former Attorney General for England and Wales and now London co-managing partner at Debevoise & Plimpton, labelled the vote ‘a historic moment’. He added: ‘While the result of the vote is clear, the process it has now committed the country to is not. The timing of negotiations, their shape and format, the extent to which the exit and new agreements can be discussed side-by-side; all of this is still to be clarified as the dust settles.’
‘However, we can be certain that the regulatory and legal implications will be significant. The environment in which businesses operate in the here and in Europe is going to fundamentally change as EU and UK law is unpicked, and new patterns are established. Business leaders and their advisers across sectors should be prepared to adapt to this fast-changing environment.’
Major City law firms set up war rooms to advise clients on the impact of the result. Clifford Chance said it had established a 24-hour ‘rapid response unit’ to deal with the implications of a leave vote, with global managing partner Matthew Layton also on call.
Clifford Chance senior partner Malcolm Sweeting said this morning: ‘We believe this outcome has serious implications for the City and many of our clients’ businesses with exposure to the UK and the EU. We are working alongside our clients to help them as they anticipate, plan for, and manage the challenges the coming political and trade negotiations will bring.’
Hogan Lovells global head of real estate Jackie Newstead said the firm had set up a constitutional task force to deal with the effect of the vote. She added that the real estate market was likely to see turmoil in the near term, adding: ‘today is going to be pandemonium’. She concluded: ‘People are concerned and may not want to invest. There will be a period when some people will say: “I’m not doing anything until I see what Brexit looks like”. But, there will be other people who see it as an opportunity.’
Martin Howe, barrister at Carter-Ruck and founding member of Lawyers for Britain said the future deal with the EU will depend on the quality of the negotiating team – ‘we have lots of leverage and bargaining tools.’
He added: ‘The only down side to this is our institutional voice as a member of the European system is lost.’
Legal Business will bring readers reaction from the profession throughout the day.
tom.moore@legalease.co.uk
matthew.field@legalease.co.uk
You can click here and here to see our two-part Insight special on Brexit with Herbert Smith Freehills. Click here for our take on voting day.
Read more analysis in: ‘LB’s Brexit take: City law’s globalisation playbook has just been shredded’
