Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.
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1). ‘No-deal’ Brexit to cost UK legal sector £3bn finds Law Society study
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 in collaboration with Thomson Reuters.
The study, which used data and macroeconomic forecasts from the National Institute of Economic and Social Research, the IMF World Economic Outlook and the Office of National Statistics to model potential Brexit outcomes, predicts growth in the sector could drop to as low as 1.1% per year (£30.86bn turnover by 2025) as opposed to steady growth of 2.1% in a ‘soft’ Brexit scenario (£33.83bn turnover).
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. This is compared to 8,000-10,000 if the UK exits Europe through a soft or hard Brexit. 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.
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.
The UK is scheduled to exit the European Union on 29 March 2019; however, with just over six months to go it remains unclear under what terms Britain will leave.
2). JP Morgan plans asset management restructuring
Initially reported by the Wall St Journal on Wednesday, JP Morgan are expected to cut their asset management by 100 employees, according to sources at the bank.
Following an internal review, JP Morgan’s Wealth and Asset Management division (AWM) has been identified as an area of the business suitable for staffing adjustments.
Sources have confirmed that dismissals have already begun on fixed income, administration and sales teams, with cuts also planned for the equity group. These have taken place globally, across multiple JPM offices.
Although the total number of employees in the US bank’s asset management division are unknown, the layoffs will likely to amount to a 1% to 2% reduction in headcount. JP Morgan spokesperson Kristen Chambers confirms: “Any reductions will be relatively small and will not impact our continued investment in client coverage and our business.”
JPMorgan Asset Management has had a fruitful period, reporting a 2 per cent rise in revenue year over year, hitting $1.8bn in Q2 2018.
There has been a shift in focus towards exchange-traded funds for the US fund manager in 2018. Having launched fixed income ETF’s on the London Stock Exchange in January this year, the division has now expanded with five further ETF specialists hired across the European business in June.
3). Movers & Shakers of the week
Sullivan & Cromwell has recruited Shearman & Sterling M&A partner Jeremy Kutner for its City ranks, marking the elite US firm’s first London lateral hire in five years.
Morgan Lewis & Bockius has ramped up its London corporate team with a triple partner hire from Herbert Smith Freehils, including London private equity head Mark Geday. He is joined in the move to the US firm by corporate partners Nicholas Moore and Tomasz Wozniak.
Latham & Watkins have made another European hire, bringing Baker McKenzie litigation partner Thomas Grützner on board in Munich.
O’Melveny & Myers Beijing partner Bingna Guo has joined the white-collar practice of White & Case in the latest exit from the US firm’s China offices
Clifford Chance corporate finance partner Alex Erasmus is leaving the magic circle firm’s London office to become chief legal officer at Hong Kong-based blockchain developer Block.one.
Office Openings & Closings