In the run-up to the UK general election, leading businesses were voicing their concerns that the country's position as a major financial centre and investment magnet could be jeopardised by Labour's hard-line stance on corporate tax and personal wealth, while at the same time they were nervously questioning the rationale behind the Tories' promised referendum on an EU exit.

One month on from the election result, and at least one of those fears has dissipated. Deborah Newberry, practice development lawyer at Kennedys, says companies "can take comfort from the pro-business world view advanced by the Conservatives. A more stable legislative and regulatory environment should allow the government to offer businesses policy continuity and encouragement of greater product innovation."

Generally, the UK's top law firms seem to be reassured that the status quo is likely to prevail, and that London's position as a major financial and legal services hub is not going to be impeded – at least in the short term. CMS Cameron McKenna managing partner Duncan Weston notes that the UK election result has had little impact on his firm's activities, saying it is a case of "business as usual".

Other firms have expressed more relief. "The overarching positive to come out of the election is that we do not face the uncertainties of a hung parliament," says Chris Saul, senior partner at Slaughter and May. "Many London practitioners were concerned that the prospect of another general election in a matter of months would have been unsettling both for the City and for the wider UK economy, so the fact that we do not have to factor in that possibility is a good thing."

Pinsent Masons managing partner John Cleland agrees: "The best news arising from the election is that we have a party with a clear majority and none of the uncertainty brought about by a new coalition.

"At a Westminster level, the hope is that a majority government can deliver quicker decisions around the critical issues for our clients, such as infrastructure investment, energy market reform and the ongoing competitiveness of the financial services sector."

Lawyers working in practice areas that may have been affected by a Labour victory are also welcoming the outcome. "There seemed to be a collective sigh of relief in the wealth management industry after the recent election result," says Ashley Crossley, chair of Baker & McKenzie's Europe and Middle East wealth management practice group. "There had been significant speculation as to the implications for wealth management if the UK resident non-domiciled regime had been abolished. There had also been some concern over the proposed changes to the taxation of funds in the UK.
"With the Conservatives securing victory, it is not expected that either of these measures will now take place. This is a positive outcome for the wealth management sector as the regime's continued existence will help attract more high-net individuals and shows that the UK is open for business."

A tangible threat…
However, investor confidence may remain shaky for a few years longer – at least until after the UK holds its promised in-out referendum on whether to remain in the European Union. Lawyers' views on the potential impact of such a vote vary widely.

"An exit from the EU would have considerable implications and negative consequences for business," argues Newberry. "Commentators are already talking about the hit on the UK economy from an EU exit. Indeed, one German think tank has calculated that leaving the EU would cost Britain £224bn."

Cleland believes the referendum on EU membership "will be the defining political issue of the decade for many of our clients. Law firms will need to stand up to be counted in this debate – our success is intrinsically linked to that of our clients so we need to help them interpret and adapt to the ramifications of a new relationship between the UK and Europe, whatever form that may take."

To maintain business confidence, Cleland warns that there needs to be a "speedy resolution" regarding Europe. "Uncertainty caused by the referendum could impact on investment flows into the UK and Europe," he says. "Steps also need to be taken to ensure that the UK, and the City of London in particular, stay at the heart of global commerce irrespective of a changed relationship with Europe.

"The uncertainty may be worth it if we can end up in a position where our clients keep the commercial advantages of membership while addressing the downsides."

Concerns over the impact of a possible exit extends beyond the effect on the City's prowess. "The prospect of an in-out EU referendum could drastically change the property market in the UK and put off foreign investment," comments Gisella Alberici, a partner at Manchester-based property and finance law firm Ratio Law. "A recent KPMG survey found that two thirds of real estate bosses think that if Britain left the EU it would have a negative impact on inbound cross-border investment – something that would affect the whole of the UK, not just the market in London.

"While some businesses and individuals who deal with property investors from overseas may find this damages possible deals and activities, others in the market may find more investment opportunities arise as foreign investors are not as active."

… or no need to worry?
Some lawyers are unconvinced that an EU exit – however unlikely – would have an impact on firms or their clients. Weston at CMS UK believes that the prospect of a referendum will have little effect on his firm's operations or clientele. "For a firm that has a significant presence in Europe, we are well positioned to keep our clients up to date and informed on key issues," he explains. "Full-service law firms are flexible and need to adapt if they are to prosper."

Crossley says an EU referendum means "very little, so far" for clients. "Many clients seem to  believe that the UK will stay in the EU. The prime minister is now engaged in a diplomatic push to deliver reforms he feels will be enough to campaign for a 'Yes' vote. With a [referendum] backstop of 2017, many clients are taking the view to watch and wait."

Instead, the massive political shift in Scotland to the SNP may pose more immediate issues for law firms, particularly if the party pushes for tax-setting powers. "Of key interest to any practitioner advising private clients on personal tax matters is whether Scotland will secure the ability to set its own tax rates," Crossley points out. "Should this occur, the wealth management industry could be kept busy with the potential movement of wealthy individuals between different parts of the UK. This could equally apply to foreign clients coming to settle in the country."

Cleland says that, while "we would still view the prospect of a full-blown constitutional separation as remote", he adds that the firm "will work objectively and constructively with our clients to help them interpret and respond to changes in policy and regulation where they diverge between England and Wales and Scotland".

Adapt and survive
Though there may be political uncertainties ahead, law firms believe that their continued success lies in being able to adapt to changing circumstances and client needs. "Law firms have a good track record of being able to adapt and develop in accordance with the political and economic landscape and their clients' needs,"
says Crossley.

"To be successful, a law firm, like all professional services businesses, needs to be able to respond to the environment within which it operates, which includes the impact of political circumstances," adds Newberry. "Ultimately, at the heart of the need to adapt are our business and client objectives. Understanding the current political circumstances and what that means to clients and their businesses is central to ensuring that a firm continues to offer a first-class service to its clients."

Cleland largely agrees. "Law firms have proven themselves to be remarkably resilient over the years," he says. But he warns against being complacent and relying too much on the UK's pro-business reputation: "Recent developments regarding the likes of HSBC and Deutsche Bank have highlighted that the UK and London are not the only places to do business."