UK recovery may stall and stutter due to fall in business deals by top 50 firms

The top 50 UK law firms have registered a fall in the total number of completed business deals, leading to fears the UK's economic recovery will stall during the next quarter of 2015.

Published in partnership with Legal Monitor, the Law Society's City Legal Index showed that, for the first half of 2015, the total number of deals decreased, although the number of deals increased slightly towards the end of that period.

The number of legal deals completed between January and June was 6.2 per cent down on the same period in 2014.

It has been suggested that these figures may indicate a slowing down of UK GDP growth in the third quarter of 2015 before beginning to pick up again in the final quarter.

The fall in total number of deals was widespread across all sectors. There was, for example, a sharp fall in the number of deals in the energy and utility sector because of the fall in oil prices.

A decline in the technology, media, and telecoms sector, compared to the particularly high level of deals in these sectors last year, was also noted.

Commenting on the figures, the Law Society's president, Jonathan Smithers, said: 'The fall in the number of legal deals in the first half of 2015 followed by the slight pick-up suggest we may see a short-term stalling in the recovery of the UK and international economy. The slowdown in China could well accentuate this trajectory.'

Meanwhile, the commercial director of Legal Monitor, David Kekwick, observed: 'The City Legal Index reflects the continued strength of legal activity supporting the UK's banking sector and the buoyancy of the commercial real estate market.

'However, with adverse economic data coming from China weighing on global stock markets and the global economy, these positive trends will be difficult to sustain throughout 2015.'

There were, though, some signs of encouragement. Deals in the finance and banking, real estate and construction, and manufacturing sectors increased in the first half of the year.

There is some indication of an underlying increase in the average value of deals during this period, although this was, at least in part, driven by the £47bn takeover of BG Group by Royal Dutch Shell deal in April - involving Freshfields and Slaughter and May respectively.

In addition, the telecoms sector saw large deals in February for Orange and Deutsche Telekom and in March for Telefonica.