Legal services sector ready to help government grow the economy

The UK government has ambitious missions to address inflation and grow the economy and the legal services sector stands ready to play its part, solicitors' leaders have said.

The Law Society of England and Wales has submitted representations to HM Treasury ahead of the Spring Budget on 6 March.*

“Legal services are an economic powerhouse, worth £60bn annually to the UK economy,” said Law Society president Nick Emmerson.

“A strong legal services sector underpins a strong economy across the board.

“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.

“However, the sector faces challenges too. Our research reveals the barriers small and medium legal businesses (SMEs) are facing, which includes recruitment and retention as well as operational and financial costs.”

“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.

“The government can send a strong signal of its support for legal businesses in the Spring Budget by extending the full expensing scheme to partnerships.

“Recruitment and retention remains one of the top issues facing SMEs and while legal apprenticeships provide an alternative, non-graduate route into the solicitor profession, they are not often a viable option for SMEs.

“The Spring Budget should be used to increase support for the legal sector by increasing funding for apprentice wages and decreasing the burden on legal SMEs of hiring apprentices.

“Urgent investment is also needed in our courts and legal aid system as it is the foundation on which our world-leading legal services sector is built.

“The package of reforms proposed builds on the existing economic strengths of our profession while unleashing the latent productivity and economic potential of the sizeable SME segment of the legal services sector, all at minimal cost to the government.”

The Law Society is calling on the 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

Nick Emmerson concluded: “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.”

Notes to editors

* Contact the Press Office for a copy of our full submission.

** Large parts of the legal services sector are at a disadvantage when investing as they are excluded from full expensing due to the scheme’s design. This has created an investment penalty which has meant that one of the most ambitious tax announcements in the 2023 Spring Budget is inaccessible to large numbers of the UK’s most valuable businesses.

About the Law Society

The Law Society is the independent professional body that works globally to support and represent solicitors, promoting the highest professional standards, the public interest and the rule of law.

Press office contact: Naomi Jeffreys | 020 8049 3928