British business will have to adapt and so will law firms, say managing partners
Michael Chissick, managing partner, Fieldfisher
What will be the short-term effect on the City?
A lot of businesses slowed down their corporate activity in the months leading up to the vote due to the uncertainty, so we saw a tougher environment as a result. So in effect it’s business as usual – it’s more that the expected upswing in deals didn’t happen.
To what extent will you have to rethink your international strategy?
We’ve always been a European firm and that’s not changing. We revealed our new strategy ahead of the referendum and part of that was to grow our footprint in Europe, and the Brexit vote changes nothing in that respect. We are committed to Europe and we merged with the Italian firm SASPI just a week after the vote. We’ll continue to look to Europe for further expansion.
Wim Dejonghe and Andrew Ballheimer, senior partner and managing partner, Allen & Overy
What will be the short-term effect on the City?
It’s undeniable that Brexit will lead to the biggest demerger in history. The UK is the world’s fifth-largest economy and we’re going to be leaving the world’s largest economic grouping, so it’s not surprising that the financial markets have been volatile over these past few weeks.
There will continue to be an impact on financing, which will be market-driven. We expect a tightening of credit terms for new loan facilities, at least in the short term while the market settles down. Possible changes to terms include shorter tenors, higher pricing and requirements for currency hedging. We also expect reduced appetite for underwriting.
Short- to mid-term it is unlikely that anything will change from a legal point of view (for three to five years) and businesses will just have to get used to this new normal. We anticipate there will likely be a substantial drop in investment, which in turn will lead to lower levels of recruitment activity in the UK for an extended period.
David Patient, managing partner, Travers Smith
What will be the short-term effect on the City?
Within the legal community there has been a lot of time spent over the past three weeks considering the implications for City law firms, our clients and the profession as a whole. But apart from that and advising on Brexit-related issues, it’s pretty much been business as usual for us.
Recruitment in the City may be impacted in the short term, but don’t forget that for many overseas institutions it’s now cheaper than it has been for a long time to do business in the City.
Charles Martin, senior partner, Macfarlanes
What will be the long-term effect on the City?
That will be entirely dependent on the deal that is struck with the EU about the extent to which London-based financial businesses will have access to the European market. On the assumption that there is not free access there will be adjustments and reallocation of resources outside the UK. However, we believe London will remain a pre-eminent global financial centre in any event.
What is the immediate effect on your dealflow? How many have been put on hold?
It is a mixed picture. Some deals have been terminated, others postponed. Some are pressing on and we’ve had new instructions. We’ve even seen some suggestion from vendors that they want to share some of the currency benefit that non-UK buyers are enjoying.
Which areas of your business will see the highest demand and are you already recruiting?
Clients will need support for Brexit restructuring projects although we see these as being run primarily in-house. If the expected downturn or recession does happen, self-evidently there will be some restructuring and litigation as a result. We would expect to address drop-off in some areas and acceleration in demand in others in part by reallocating existing resources.
What are your non-European clients saying?
Most were stunned and are now bemused. They are trying to identify the opportunities, but volatility and uncertainty are not helping.
Edward Braham, senior partner, Freshfields Bruckhaus Deringer
What will be the long-term effect on the City?
It’s early to say but language, law, infrastructure, timezone and talent all work in London’s favour.
What is the immediate effect on your dealflow? How many have been put on hold?
There was a lull around the vote but we’ve seen encouraging signs in both the M&A and financing markets, with the Softbank/ARM deal standing out. Much will depend on the markets remaining relatively stable.
What are your non-European clients saying?
They are taking an interest in the impact of Brexit on their business, generating several large advisory mandates. Some are exploring major acquisitions and we are benefiting from that.
Oliver Brettle, London executive partner, White & Case
What will be the long-term effect on the City?
It remains to be seen to what extent EU business will be impacted in the longer term by the UK’s decision to leave the EU.
The City has representative offices of more financial institutions than anywhere else in the world. That won’t change overnight, nor will the concentration in London of financial talent and expertise. My guess is that the individuals within the leading financial institutions in the City will become more focused on non-EU business over time as more EU-only business is written in Frankfurt and Paris, for example. That will then influence the legal work done in London.
To what extent will you have to rethink your international strategy?
We continue to assess the impact of the UK’s vote to leave the EU, but remain confident in the continued strength of our global network and in the focus of our strategy on the US and London. London is not going to lose its position.
In time, the EU will conclude that it values and needs London and the UK will conclude it values and needs the EU. Once the initial period is out of the way I’m sure piecemeal pragmatism will hold sway. What law firms, as other businesses, will need to do is look at the new structure as a new challenge and seek to guide or advise clients as they adapt to this challenge.
To what extent do you think your 2016/17 financial performance will be affected?
If uncertainty persists, M&A remains quiet and the capital markets stay on hold, it will be difficult for any law firm in London to have a ‘good’ year.
Margaret Robertson, managing director, Withers
To what extent do you think your 2016/17 financial performance will be affected?
Our international expansion over the past decade and a half should help to insulate us against any serious impact from Brexit. If the UK economy does tip into recession, as has been predicted, things are likely to be slower in London but our US and Asian operations will continue to be busy, if not even more active, this year.
Which areas of your business will see the biggest drop-off in demand?
Real estate transactions in the UK are likely to be less certain, though we can expect some big deals to be struck on both the residential and commercial sides in the next couple of years. Our UK and Italian corporate teams are also likely to be quieter, though many of our clients are monitoring for bargain acquisitions.
Which areas of your business will see the highest demand, and are you already recruiting?
We’ve invested in growing an international immigration team over the past few years and that effort will prove its worth without a doubt in the next several years. I expect our wealth planning teams around the world will be much in demand as wealthy families review their structures and plans, and make changes when more clarity appears.
What are your non-European clients saying?
Many of our Asian and American clients have come to us to ask for advice and guidance on the situation. Principally, they are looking to understand where there are opportunities in the international volatility, and where they need to hedge against risk.
Chris Lowe, co-managing partner, Watson Farley & Williams
To what extent do you think your 2016/17 financial performance will be affected?
Looking to our ‘super-sectors’ – transport and energy – as these are generally US dollar and international industries, we anticipate and are planning for minimal impact as a result of the Brexit vote on our business.
Susan Bright, UK and Africa regional managing partner, Hogan Lovells
What will be the long-term effect on the City?
I hope less significant than many of the pundits feared. The City has always been a strong centre for international trade, long before the creation of the EU. The talent base here is incredibly deep. Where legal entities are based and regulated and where their people are located do not, of course, have to be the same thing.
To what extent do you think your 2016/17 financial performance will be affected?
We report in US dollars so a decrease in the value of the pound against the dollar will have an effect, but how much is difficult to quantify. A lot of law firms are likely to be facing similar issues in relation to their sterling reporting when they have to take into account the drop in the value of the pound against the euro.
Which areas of your business will see the highest demand and
are you already recruiting?
Undoubtedly, the area of regulation in all its aspects. In addition, we have geared up our capabilities in the public policy area to help us work with clients about what Brexit may mean in practice and how to influence the debate.
What are your non-European clients saying?
Many were taken by surprise and had some immediate concerns. As the markets and political climate settle down we are starting to see interest in the opportunities Brexit may bring, as well as a continuing focus on risk mitigation strategies. The ARM deal is an example of that in action.
Sharon White, chief executive, Stephenson Harwood
What will be the long-term effect on the City?
The big question remains: what kind of relationship will post-Brexit Britain seek with the rest of the EU? It looks increasingly likely that the new government will seek a relationship with the EU governed by a trade agreement. Whatever direction it takes, we should not delay the process for too long.
Uncertainty fuels anxiety and no-one should be fooled by the relatively quick recovery of the markets in the past few weeks and the limited fall in the pound’s value. We won’t know for some time what the vote to leave the EU means for the UK, but I’m confident that London will continue to be a major financial and commercial centre. Similarly, the reasons clients chose English law and the English courts remain unchanged.
