The U.K. voted Thursday to leave the European Union in a stunning referendum result that has huge global implications. The vote wasn’t nearly as close as had been predicted, with the Leave supporters winning 52% to 48%, a margin of more than 1.25 million votes.
The U.K. will not leave the EU for at least two years, but the shocking result has already caused widespread market turmoil.
The value of the U.K.’s currency slumped by over 10 percent to just $1.32—its lowest level in more than 30 years and the largest single-day fall in history. Equities markets across Europe have suffered massive losses, with more than £100 billion wiped off the FTSE100—the share index of the U.K.’s 100-largest listed companies. These are some of Big Law’s most important clients. The banking sector has been particularly hard hit, with shares in Barclays, Lloyds and RBS dropping by at least 30 percent. Rating agency S&P has said that it is likely to downgrade the U.K.’s sovereign credit rating.
British Prime Minister David Cameron, who campaigned for the U.K. to remain within the EU, has announced that he will resign in October.
Law firms are braced for a period of intense activity, with lawyers already receiving floods of inquiries from clients trying to figure out what the result means for their businesses. Most major firms are running 24-hour hotlines to deal with the massive levels of client demand.
The longer-term impact of the unprecedented move is unknown, however.
Even before the vote, the market uncertainty caused by the referendum saw a significant decrease in activity across key law firm practice areas—particularly those with a transactional bent—as deals were postponed and investors withdrew funds. The total value of initial public offerings on European exchanges in the first six months of the year was down by more than half when compared with the same period in 2015, according to financial markets platform Dealogic. M&A activity fell by a similar amount, and private equity work has all but dried up. Bank of England data, meanwhile, revealed that investors removed around 65 billion pounds ($92 billion) from the U.K. between February and April—the greatest exodus of funds since the height of the recession.
Trade, financial services and regulatory lawyers may now see significant increases in workflow. Martin Coleman, global head of the antitrust and competition practice at Norton Rose Fulbright, said Brexit will involve “the biggest program of regulatory and legislative reform ever.” This should go some way toward compensating—in the short term, at least—for what will almost certainly be another steep and prolonged drop in transactional activity. But this work will not substitute for big-ticket deals, which can keep scores of lawyers busy for months.
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U.K. competition lawyers also risk losing their rights to EU professional legal privilege and the right to plead before the European Court of Justice in Luxembourg. Several major law firms, including Allen & Overy, Freshfields Bruckhaus Deringer, Hogan Lovells and Slaughter and May, pre-emptively moved to register scores of lawyers in Ireland in an attempt to protect these rights in the event of a Brexit.