Although the Coronavirus (the Virus) has dominated the news, I try not to make it the sole focus of these issues. However inevitably, it does come up and is indeed a major cause.


Banks to the Rescue!

Due to the Virus, many companies have been negatively affected and as a result, economic growth is slowing down. Since implementing social distancing and quarantining measures, company profits have been hit due to factors such as: reduced consumer spending, office closures and overall operational delays, all causing a halt in productivity. If businesses are suffering, the economy is suffering.

So, to keep the economy running and prevent a complete breakdown, central banks have decided to help with the issue by setting aside money to invest into economies.

European Central Bank (ECB) announced its Pandemic Emergency Purchase Programme – where it looks to buy 750 billion euros worth of bonds and debt from governments in the EU to help support their economy.[1] This will help reduce interest rates, which reduces the cost of borrowing, and so encourages more consumer spending (similar concept expanded on below).

Here in the UK, the Bank of England cut interest rates again from 0.25% to 0.1%[2] (after cutting it down from 0.75% to 0.25% only a couple of days ago) and decided to pump £200 billion into the economy through the quantitative easing (QE) bond buying programme.[3]


What does this mean?

Bank of England

The QE bond buying programme means that the Bank of England creates more money (digitally) and uses that money to buy bonds from the private and public sector (e.g. government debts).[4] The government/these companies in the private sector that are suffering from slow growth, then issue bonds to the Bank of England in exchange for more money to invest into their businesses and enhance growth. In the government’s case, the money is required to invest into areas of the economy that need rescuing (e.g. providing more resources for the NHS to combat the coronavirus and support for low income employees, whose wages will be badly affected in such times).

The reduction in interest rates from 0.25% to 0.1% allows consumers (like you and I) to borrow from banks and not have to worry about paying back with high interest. This is a great way of encouraging more borrowing from banks and in sequence, encouraging more spending, which in turn will help economic growth. The reduction of interest rates is essentially another way the Bank of England is trying to rescue the economy. 

With record low interest rates, investors shouldn’t expect to receive high returns on savings, nor should they expect to receive high returns as shareholders either (due to companies wanting to hold onto as much cash as possible, so may reduce dividends being paid out).


Impact on Law firms

Rising unemployment, reduction in consumer spending, massive slowed growth of businesses (reflecting in the plunge in the FTSE 100) and record low interest rates.  These happenings in the UK are signs of a recession on the horizon, and so overall, law firms may very well receive a reduced amount of business as companies begin to cut costs and rely more on their in-house legal team, which may be cheaper. 

Richard Susskind’s  “more for less” challenge will become even more evident and more of a challenge for law firms, as firms are forced to provide increased high-quality legal services at lower prices. Those firms that fail to adapt to this could suffer. 

However, with the buying of bonds and various debts, finance lawyers will be in high demand as services such as financial restructuring, and regulatory compliance will be required. Unfortunately, or fortunately (whichever way you look at it), insolvency lawyers may be on constant standby at this point in time, as many companies will go bust. 

It must be said however, that as of yesterday morning, the FTSE 100 rose 1.83% in response to the measures taken by the Bank of England. So I suppose it isn’t all doom and gloom. 


The High Street Saga  

As part of a planning white paper, Robert Jenrick (housing secretary) proposed that developers be given greater freedom to demolish abandoned commercial buildings and turn them into residential homes.[5] The freedom to turn commercial buildings into residential ones poses an innovative method to tackling the wider commercial issue of a decline in the high street. This is due to factors such as an increased use of online platforms (e-commerce). The Virus has also added to the further decline of the high street; e.g. as a result of quarantine measures, causing reduction of visits to high street stores. Next plc for example, has planned for a sales hit of up to £1billion in the year ahead.[6]

What does this mean?

With an increase in store closures, many employees are constantly losing their jobs, and so unemployment will continue to rise.  

If building developers are allowed to turn commercial buildings into residential areas, this may help the current housing shortage problem

Impact on Law firms 

Should developers be allowed to demolish abandoned commercial buildings and turn them into residential homes, real estate lawyers would get involved here, and so increase revenue for that area of law. 

Employment lawyers will also be on standby for potential unfair dismissal claims (although this may largely be pro bono work), and of course insolvency practitioners will be welcomed for any more closures. 

Ikenna Henry Onyebuchi

Ikenna Henry Onyebuchi

Hello there! I am Ikenna Henry Onyebuchi, a graduate from the University of Exeter with an LLB Law degree. I am currently on a Career Commitment Scholarship, studying at BPP University Law School, enrolled on the Legal Practice Course, with the combined master’s in law degree. I am also currently in search of a training contract to embark on my journey to becoming a solicitor in England, and I will be sharing my journey through BAME Nation!


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