Foreword
Summary
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A1
Acknowledgements
Figures and tables
Economic value of English law | Oxera

4.2.5: The value of English law to the UK economy is significant

Published: October 5th 2021
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2.1: Introduction 2.2: Economic value is created by ‘gains from trade’—realised through transactions 2.3: The law underpins growth in the volume of transactions (and therefore the generation of economic value) 2.4: Considering the law as infrastructure on which transactions take place
3.1: Introduction 3.2: The economic value created through the UK legal services ecosystem 3.3: The economic value created for the UK as a whole -3.3.1: English law as a global market standard -3.3.2: Agglomeration effects -3.3.3: Reduced transaction costs for UK businesses trading internationally 3.4: The choice of law and legal services for internationally mobile transactions
5.1: Introduction 5.2: English law suffers from a type of ‘market failure’ 5.3: Solutions to the free-rider problem: coordination across private and public parties 5.4: How to manage the ‘provision’ of English law
A1.1: Maritime sector -A1.1.1: Size of the market -A1.1.2: Overview of governing laws -A1.1.3: Risks and opportunities A1.2: Commodity trading -A1.2.1: Size of the market -A1.2.2: Overview of governing laws -A1.2.3: Risks and opportunities A1.3: ISDA swaps and derivatives -A1.3.1: Size of the market -A1.3.2: Overview of governing laws -A1.3.3: Risks and opportunities A1.4: International insurance contracts -A1.4.1: Size of the market -A1.4.2: Overview of governing laws -A1.4.3: Risks and opportunities
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Chapter 4

4.2.5: The value of English law to the UK economy is significant

As we set out in section 4.1, for the purpose of this study, we have examined four examples in detail. These serve to illustrate the potential value for the UK economy that is underpinned by English law in those sectors, giving us multiple perspectives on the economic value of English law to the UK. However, in addition to this suite of numbers, there are many other examples we could have chosen where English law contributes significant value. For instance, we calculate that the total value of global mergers and acquisitions (M&A) deals governed by English law was approximately £250bn in 2019.[1]Oxera analysis based on data provided by Allen & Overy, and Dealogic (2020), ‘Value of merger and acquisition deals worldwide in 2019, by region’. Other examples where English law may be particularly prominent include the construction sector, energy contracts, insolvency, and bond issuance among others.

In each of these examples, a large number of transactions are internationally mobile, and these represent significant economic value. Therefore, the potential value highlighted in the sections above, while already very significant, is likely to account for only a small portion of the total value of English law to the UK economy.

Indeed, the value of English law to the UK economy is likely to be far greater than the sum of these individual parts thanks to agglomeration and network effects (as discussed in section 3.3). In addition, English law is likely to add value through channels we have not attempted to quantify for this report, such as its important role in contributing to maintaining the UK’s influence and ability to promote British values. [2]Academic research in the sociology and political science literature has discussed various states’ political strategies such as in international education: Lomer, S. (2017), ‘Soft power as a … Continue reading

We expand on this further in Box 4.1 below.

Box 4.1 English law, global influence and the importance of London

One source of value for the UK that derives from the use of English law internationally is the UK’s increased global influence, or ‘soft power’.

When the infrastructure of English law is used by a large number of businesses globally, it can, and has, become one important business language. Businesses can, and in many instances do, only ‘talk’ to each other through legal constructs—i.e. through contracts. In the same way that the English tongue is an important way for individuals to interact internationally (even when neither party is UK-based), English law is one mode through which businesses communicate.

Indeed, discussions between businesses (e.g. around financing, employment, solvency, etc.) will be framed and shaped by the business language available to them. To the extent that English law is this business language for many transactions internationally, it provides the UK with a degree of global influence.

This ‘soft power’ is likely to draw people and resources to the UK for experience, education, training, and leadership. This further adds to the importance and attraction of the UK (and London in particular) as an international business hub, increasing the benefits from agglomeration as described in section 3.3.2 above.

London is the centre of the UK’s economy and is a centre for international business. While it is hard to disentangle the various factors that make London such a successful international business hub, it is clear that it creates a very large amount of value for the UK economy. For instance, as a region, London had the highest net fiscal surplus per head at £4,369 in FYE 2019, with total public sector revenue of £162bn. In terms of GDP, London accounted for £504bn in 2019 (23% of the UK total), at £56,199 per head compared with the UK average of £32,876.

Source: ONS (2021), ‘Country and regional public sector finances: financial year ending 2020’; ONS (2021), ‘Regional economic activity by gross domestic product, UK: 1998 to 2019’.

References

References
↑1Oxera analysis based on data provided by Allen & Overy, and Dealogic (2020), ‘Value of merger and acquisition deals worldwide in 2019, by region’.
↑2Academic research in the sociology and political science literature has discussed various states’ political strategies such as in international education: Lomer, S. (2017), ‘Soft power as a policy rationale for international education in the UK: a critical analysis’, Higher Education, 74:4, pp. 581–98.