Legal and professional services sector 'overlooked' and at risk

The UK legal services sector and the recognition of lawyers’ professional qualifications are at risk if no trade deal is reached with the EU by 31 December.

An in-depth report published by the House of Lords’ EU services subcommittee report found that the needs of the “hugely important” professional and business services sector have been overlooked by government during negotiations.

The report warned that without bespoke UK-EU arrangements, UK legal professionals and firms would be exposed to a range of establishment and investment barriers across the EU and EEA.

Last year, more than £15.1m worth of legal, accounting, management consulting and public relations services were exported to the EU.

Legal services (along with audit, accountancy and management consultancy) are particularly reliant on the EU market, which accounts for 37% of professional and business services exports.

The subcommittee’s inquiry found that most professional and business services companies in the UK are small operators, with two-thirds based outside of London and the south east.

However, the report said that without a UK-EU agreement, UK lawyers may become unable to operate in the EU under UK-specific corporate structures, particularly LLPs.

It stated: “Restrictions on corporate form would particularly affect the legal and audit sectors in the UK.

“We strongly encourage the government to continue to seek an agreement that removes the potential for limitations on corporate forms, such as LLPs.”

The recognition of lawyers’ qualifications is also at risk.

“With the UK’s exit from the Single Market”, the report pointed out, “UK legal professionals will lose some of their existing rights, such as the ability to advise on EU law under their home state title and represent clients before EU courts and institutions”.

The committee said the recognition of qualifications by third country authorities is crucial, in some sectors, to enable cross-border trade.

It identified this as one area “where a bad deal, which prevents the agreement of bilateral supplementary agreements on mutual recognition, could be worse than a no deal”.

It urged government to ensure that an agreement “explicitly allows for the conclusion of supplementary bilateral arrangements on the mutual recognition of professional qualifications, including at the Member State level”.

 The committee called for both sides to “come to an understanding… given the potential reciprocal benefits for UK and EU legal professionals, businesses and citizens”.

Committee chair Baroness Donaghy said: “This sector, and the people who depend on it for their livelihoods, will suffer if its needs are not reflected in the UK’s negotiations with the EU.

“We are concerned that they have been overlooked in the negotiations so far.”

She also warned that despite being so close to the end of the transition period, many businesses, “especially SMEs, are not well prepared, not least because they are not sure what to prepare for”.