Commercial Awareness Digest - 23rd February 2026

Recent Changes to the Competition and Markets Authority

By Esme Glover

On the 20th of January 2026, proposals were announced to reform the Competition and

Markets Authority (CMA), which is an independent department that acts as the UK’s competition regulator.

According to the CMA’s Executive Director of Mergers, Joel Bamford, the proposed changes are intended to improve the pace, predictability, proportionality and the overall process of the UK’s merger control regime. Furthermore, the reforms have the overarching purpose of supporting economic growth for the nation. While the CMA plays a crucial protective role in ensuring fair competition and preventing problematic mergers, it has also contributed to a perception that the UK is a challenging and uncertain jurisdiction for merger activity. The UK government has suggested that the CMA’s approach is one of the main reasons that economic growth is slow-moving, particularly as delayed transactions can result in deals falling through.

The CMA typically intercepts merger deals for two reasons. The first being if the target company generates over £70 million from UK sales, and the second being if the merger is expected to hold a 25% or more share of a good or service in the UK. After this initial investigation, if potential competition concerns are identified, a ‘Phase 2 investigation’ may be initiated by the CMA. This is a process in which law firms are frequently involved. Against this backdrop, the proposed changes to the CMA aim to reduce the number of phase 2 investigations initiated, as well as the number of reviewed mergers. Additionally, the UK government will assume a more active role in overseeing the CMA, particularly as the Secretary of State will be the authoriser of key guidance documents of the CMA.

These changes are likely to have significant implications for law firms, given the close relationship between transactional work and CMA decision-making. On the transactional side, the streamlined regulatory framework may increase the volume of UK-based mergers law firms advise on, as buyers gain greater confidence in the certainty and speed of the approval process in the UK. Conversely, competition teams may see a reduction in their workload, particularly if fewer mergers are reviewed and scrutinised. This could ultimately decrease the demand for competition advisory services as there is less at stake with eased regulations.

Overall, the proposed changes highlight how regulatory reform can affect diverse practice areas in distinct ways. They also reflect the dynamic nature of commercial law and the importance for lawyers to remain agile and adaptable in response to shifting regulatory landscapes.

Client account interest: what the government’s proposal means for law firms

By Zuha Malik

A government proposal could quietly change how law firms in England and Wales handle client money. The plan would require firms to pass on a portion of the interest earned on funds held on behalf of clients to support the justice system. Although the change is technical, it matters because client account interest has become a meaningful source of income for some firms in recent years. The shift could influence everything from transaction timetables to how firms recover costs from clients.

When law firms act on transactions such as property purchases, mergers or litigation settlements, they often hold large sums of client money temporarily. While that money sits in client accounts, it earns interest. Historically, much of this interest (particularly from pooled client accounts) has been retained by firms rather than passed back to individual clients. During periods of low interest rates, this was relatively insignificant. As rates rose sharply, however, client account interest quietly became a meaningful source of income for many firms.

The Ministry of Justice has now proposed that 75 per cent of interest earned on pooled client accounts, and 50 per cent from individual client accounts, should be redirected to support the justice system. Ministers argue that this is a “tried and tested” model already used in countries such as the US, Canada and Australia, where similar schemes help fund legal aid and access-to-justice initiatives.

From the government’s perspective, the proposal offers an attractive revenue source at a time when public finances are stretched and the justice system is widely seen as underfunded. That pressure has been sharpened by recent parliamentary criticism: a report from the Public Accounts Committee warned that legal aid provision remains unsustainable and that years of underinvestment have created legal aid deserts and higher downstream costs for courts and other public services. Against this, redirecting client account interest allows ministers to point to a funding solution without raising headline taxes.

For law firms, however, the picture is more complicated. Smaller and high-street firms have often relied on client account interest to support profitability and smooth cash flow. Removing a large proportion of that income could force firms to raise fees, potentially cut costs, or in some cases exit the market altogether. The Law Society has warned that the proposals risk harming access to justice, particularly in areas already underserved by legal providers.

By contrast, the financial impact on large City and international firms is likely to be more limited.  Client account interest typically represents a small fraction of overall revenue, and larger firms are better placed to absorb both reduced income and additional compliance requirements. However, the proposals may encourage greater focus on transaction efficiency and cash management, as firms seek to limit the time client funds remain on account. There is also a reputational dimension: firms operating at the top of the market are increasingly sensitive to perceptions around transparency and the use of client money.

These commercial considerations sit alongside regulatory obligations. The Solicitors Regulation Authority already requires firms to act fairly when handling client funds, and any new scheme would add a further layer of administrative complexity - one that larger firms may manage more easily than smaller practices.

Ultimately, the proposal underlines a familiar tension in legal services between commercial sustainability and public funding pressures. If the changes go ahead, firms will need to think more carefully about how long client money is held and how costs are recovered.