UK's Top 100 firms cool Russian expansion plans
Interest in overseas growth shifts from emerging to mature markets, though China remains a strategically vital destination
Increased sanctions, tumbling oil prices, and the value of the rouble are some of the reasons why Russia is set to lose the attention of the UK's Top 100 law firms, reluctant to expand overseas due to a volatile global economy.
New research from Thomson Reuters Legal business found that only a quarter of finance directors (FDs) at 26 of the UK's top firms said it was likely they would look to expand to improve profitability, compared to a third who did in 2014.
Interest of expansion in Russia saw one of the sharpest falls from those who responded to the survey. Just 12 per cent of FDs considering moves to Russia and Central Asia, compared to 48 per cent last year.
Firms have also lost confidence in Sub Saharan Africa, which has been hit by a downturn in oil and metals prices. None of the firms surveyed marked the region as an area of interest, compared to 64 per cent that previously picked it as ripe for expansion.
Interest in overseas growth has shifted away from the emerging markets to North America, Western Europe, and Japan, which have all gained in popularity as locations for development in the last year.
Sam Steer, head of large law segment for Thomson Reuters, remarked: 'The fall in commodity prices over the last year has, for the time being, turned many appealing emerging market growth opportunities for law firms into much less attractive prospects. However, UK law firms have grown into such profitable enterprises partly because of their willingness to make long term investments in overseas expansion.
'Whilst law firms are currently going through a "risk off" period in terms of overseas expansions that may change as commodity prices stabilise.'
The research found that China is still the most attractive destination and a strategically vital market for many law firms. Some 80 per cent of FDs say firms should be expanding there.
Despite this, the fall in oil prices the Gulf has maintained its appeal - with 76 per cent saying firms should expand there.
'The Gulf economy has wrong footed foreign law firms before who withdrew too quickly after the last major downturn in oil prices. Although Gulf economies are clearly going to be impacted by the fall in oil prices, they are still much lower cost oil producers than most of their global competitors,' added Steer.