I am often asked on my insight into the impact on a British exit from the EU and its effect within the legal recruitment industry.

This would depend on the form the exit would take.

Exit 1: EEA but not EU

The UK could leave the EU but remain part of the European Economic Area (EEA) and have a relationship with the EU like Norway, Iceland and Liechtenstein.

  • The UK would remain bound by much of EU law (e.g. laws concerning employment, the environment and competition) but would cease to have a vote or formal role in the legislative process.
  • The UK would become exempt from certain EU policy areas including fisheries, energy, justice and foreign policy.
  • The free movement rules would continue to apply, meaning that the UK could not restrict EU immigration.
  • The UK’s financial contributions to the EU budget would be likely to reduce, albeit it would still be required to contribute substantially towards the central running of the Internal Market.

Exit 2: EFTA but not EEA

The UK could also re-join the European Free Trade Association (EFTA) but remain outside the EEA in a manner similar to Switzerland. The UK was a founding member of EFTA before joining the then EEC in 1973. By becoming an EFTA member, the UK could enter into bilateral trade agreements with the EU, as Switzerland has done.

The UK could leave the EU and follow Turkey’s example by entering into a customs union with the EU.

  • This arrangement would give access to the EU Internal Market for goods without customs duties.
  • However, access to the Internal Market would be conditional on the UK imposing the EU-set common external tariff on imports from outside the customs union. The EU would have the right to negotiate trade agreements in goods without input from the UK.
  • The arrangement would cover goods but not services. UK service providers (including financial services) would lose their current right to provide services on equal terms with EU members, although the UK would then be free to regulate its own services sector.

Free Trade Agreement

  • The UK could seek to negotiate a comprehensive Free Trade Agreement with the EU, covering both goods and services. The UK would then only be subject to EU law if specifically maintained in the agreement.
  • This option would give the UK the freedom to set its own laws.
  • Unless covered by the agreement, UK businesses would lose their current Internal Market rights (for example, the freedom to establish in other EU countries). This could have an impact on whether international companies use the UK as their European base.
  • Most commentators believe that the UK is unlikely to achieve such an agreement without significant concessions, including in relation to the free movement of workers.

Exit 3: WTO-only relationship

Although there exist a broad set of rules governing the relationship between the EFTA states, they do not go so far as to create laws by which the UK, and businesses operating within the UK, would be bound. The UK would, however, be required to adopt the free movement rules to gain access to the Internal Market.

The UK would be free to conclude trade agreements with other countries, either independently or jointly through EFTA. However, each agreement would need to be negotiated separately.

The Exit itself would take circa 2 years to implement, the position of firms in England would have a spike in domestic work, on the short term, but their international position would diminish as the U.K would no longer be seen as the core focus for policy within the EU. As such there would be a diminishing demand for key lawyers in the U.K on certain matters, such as employment, energy, IP, regulatory and competition matters and financial. The investment of foreign firms into the U.K would most likely diminish to one of satellite offices, with greater investment devoted to other international safe harbours such as France and Germany.

Law firms, are in nature receptive to the whims of their clients. The UK has positioned itself as a Financial, Insurance and Legal service capital for key businesses, due to its position within the EU affording major corporations to have their European capital in London. If the changes and Brexit do indeed happen, the effects would be one of a change from demand in the UK for legal services diminishing to an extent, and an increase in demand in other international harbours.

Author: Bruno Navalha, Managing Director