Public sector cutbacks to hit legal profession more than most: CEBR

The legal profession will be the second hardest hit services industry after research and development as a result of “inevitable” belt tightening in the public sector, a leading economic forecasting organisation has claimed.

The Centre for Economics and Business Research said external services providers will be one of the first areas senior civil servants turn to when they are asked to find billions worth of “efficiency savings”, well ahead of job cuts. Although the services sector is generally beginning to show signs of recovery, this could be hampered by fiscal retrenchment in the public sector.

According to the CEBR, the proportion of “industry production sold to government and government agencies” for the legal profession was at least 25% (although it should be noted that these statistics only relate to 2006).  This was behind R&D (almost 40%) but ahead of real estate, computer services, architecture and engineering and accountancy.

Ben Read, a managing economist at CEBR, said: “Whilst there is almost certainly a proportion of government expenditure on external advisors that could be cut without any noticeable impact on public services, ministers should think carefully about wielding this particular axe. Not only can external expertise play a crucial role in helping government become more efficient and effective, many projects could not be achieved without the support of the business services sector.

“Cutting these budgets is an easy option compared with cutting public sector jobs, but unfortunately whoever forms the next government will quickly discover that significant cost savings can only be made by cutting the public payroll.”

CEBR predicted that employment in the business services sector would be around 3.4% lower in 2011 than in 2009. The number of jobs in ‘legal activities’ will fall from 293,000 to 286,000 in the next twelve months.

Its report contrasts with recent comments made by Tony Travers, director of the Greater London Group at the London School of Economics, to the ACSeS annual conference, suggesting that the demand for legal advice is set to grow.

Travers said a range of factors pointed to this conclusion, including the renewed interest in outsourcing or restructuring services, a rise in employment disputes, litigation over stopped or reduced funding, and the government’s proposed asset sale.

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