City Legal Index suggests UK recovery may stall 

The Law Society City Legal Index for the first half of 2015, published in partnership with Legal Monitor every six months, has been released. The index tracks publicised business deals facilitated by the top 50 UK law firms and provides a gauge of City firm input into the wider economy.

The total number of deals decreased in the first half of 2015 (Jan-June), although the number of deals increased slightly towards the end of the period.

Law Society president Jonathan Smithers comments:

‘Legal services are used by all businesses and sectors, so the City Legal Index provides a useful overview of the economy and how different sectors are faring.’

‘The fall in the number of legal deals in the first half of 2015 followed by the slight pick-up suggest we may see a short term stalling in the recovery of the UK and international economy. The slowdown in China could well accentuate this trajectory.’

There is evidence that the number of legal deals may be used as an indicator of the direction of future growth in the economy in six to nine months’ time . If this is the case then the decrease in the number of deals over most of the first half of 2015, and increase towards the end of the period, may indicate that UK GDP growth could slow down in the third quarter of 2015 but begin to pick up again in the final quarter.

The fall in the total number of deals was widespread across sectors, although there was a particularly sharp fall in the number of deals in the energy and utility sector because of the fall in oil prices. There was also a decline in deals for the technology, media and telecoms sector compared to the particularly high level of deals in this sector last year.

Deals in the finance and banking, real estate and construction, and manufacturing sectors increased in the first half of 2015 and there is also some sign that the average value of deals may be increasing.

Commercial director of Legal Monitor David Kekwick comments:

‘The City Legal Index reflects the continued strength of legal activity supporting the UK’s banking sector and the buoyancy of the commercial real estate market. However, with adverse economic data coming from China weighing on global stock markets and the global economy, these positive trends will be difficult to sustain throughout 2015.’

There is some indication of an underlying increase in the average value of deals in this latest period from January to June 2015, but this was at least in part driven by a large Royal Dutch Shell deal in April, and by three large deals in the telecoms sector in February and March. The weakness of the pound against the US dollar in the first half of 2015 also increased the value of deals conducted in dollars.

Source: The law society – City Legal Index suggests UK recovery may stall

---