The UK legal sector could suffer a £3bn revenue hit and lose 12,000 jobs by 2025 in the event of a 'no-deal' Brexit, according to a new study released by the Law Society.

The study warns against the potentially "significant negative effects" on the legal sector of a hard Brexit, an outcome that is expected to hit turnover growth and economic performance across all sectors, resulting in reduced demand for legal services and a decrease in employment in the legal sector.

In its analysis of both 'soft' and 'hard' Brexit outcomes, the Law Society anticipates a near £3bn loss in turnover to the legal sector by 2025 in the event of a no-deal. The study suggests that, if in such a situation the UK were to fall back on World Trade Organization (WTO) rules, growth in the sector could drop to as low as 1.1% per year – or £30.86bn turnover by 2025 – as opposed to steady growth of 2.1% in a 'soft' Brexit scenario – or £33.83bn turnover.  

Both figures contrast starkly with the 4.6% average annual growth the legal sector saw before the 2008 financial crisis.

Though the findings suggest a buoyant market until 2020 – due in large part to an increase in work flowing from post-Brexit regulatory changes – a no-deal scenario is likely to have a serious long-term impact on the legal sector.

A no-deal Brexit, the Law Society forecasts, would result in 12,000 job losses from the sector in 10 years. The study does, however, suggest this will owe not just to Brexit, but also to the increasing adoption of new technology, which during a 20-year period could see the legal workforce shrink by as much as 20%.

The study also suggests that UK legal services exports are unlikely to benefit in the medium term from the weaker pound which, although in recent years has resulted in an uptick in net exports, has already produced benefits that are unlikely to reappear in the longer term.

Highlighting in particular the impact on the City, Slaughter and May partner Jeff Twentyman said: "At best, Brexit will continue to cause disruption and uncertainty for the foreseeable future. Whatever happens in the short term, in the longer term, say over five years and further, London will not always be the easiest and most obvious choice it once was."

City firms have in recent years hedged against the no-deal scenario by registering their lawyers in Belfast, with 1,644 England and Wales solicitors registering since 2016.

Law Society president Christina Blacklaws commented: "Brexit is likely to have a significant negative effect on the legal sector in the medium and longer term. This is largely due to the knock-on impact of Brexit on the wider economy as demand for legal services relies on the success of other sectors of the UK economy.

"A hard Brexit could have a significant impact on employment in the sector, with lower growth and less investment in UK firms leading to lower productivity growth in the sector."