The Law Society has stressed that the £60bn legal services industry in England and Wales can play a key role in rebooting the UK economy, but more support is needed to accelerate growth across legal sector SMEs.
The Law Society of England and Wales has submitted representations to HM Treasury ahead of the Spring Budget on 6 March 2024, where its president Nick Emmerson, said:
“Legal services are an economic powerhouse, worth £60bn annually to the UK economy.
“As employers, law firms can be found in every region, city and town across England and Wales. Growing legal hubs can be found from Bristol to Newcastle, spreading the benefits of the sector throughout the UK…A strong legal services sector underpins a strong economy across the board.”
However, Emmerson also commented on the challenges facing a large swathe of the legal sector, including recruitment and retention and operational costs for small and medium legal businesses (SMEs). He said:
“The Law Society is calling on the government to remove the investment penalty on law firms, by extending the full expensing scheme to legal partnerships. Large parts of the sector are at a disadvantage when investing, as they are prevented from taking part in the Treasury’s scheme.
“Many law firms operate under the partnership model and as such partners are taxed individually. This means they do not pay corporation tax and so cannot access the scheme. This creates an odd situation where an insurance company could invest in IT and receive the allowance, but a law firm next door doing the same thing would be unable to.”
He called for the UK Government to send a ‘strong signal of its support for legal businesses in the Spring Budget by extending the full expensing scheme to partnerships’. In particular, increasing funding for apprentice wages and decreasing the burden on legal SMEs of hiring apprentices.
The Law Society has called on the UK Government to:
- Remove the investment penalty and extend full expensing to legal partnerships.**
- Broaden the National Skills Fund to provide retraining for employees in the legal sector.
- Boost support for legal businesses, especially SMEs, to take on apprentices.
- Create a grant scheme to support small and medium-sized law firms with the costs of adopting productivity boosting LawTech, modelled on Singapore’s Tech-celerate for Law scheme.
- Expand the Cyber Essentials Programme so more legal SME firms can access the support it provides.
- Provide courts with the funding necessary to carry out repairs, remove Reinforced Autoclaved Aerated Concrete (RAAC) and replace lost capacity while repair works take place.
- Immediately invest £30m into criminal legal aid rates to make up the shortfall in the recommendations of the government’s independent review of the sector.
- Inject £11.3m into early advice for civil legal aid to prevent the system’s collapse while the ongoing review takes place.
“By implementing the changes and policies outlined in our submission, legal services, from the high street legal practice to the global law firm, can help drive innovation and widespread economic growth across all our communities.”