Justice secretary Kenneth Clarke has predicted that the advent of alternative business structures could have as dramatic an impact on legal services as the so-called ‘Big Bang’ of 1986 had on the financial sector.

Speaking this morning at a conference on promoting UK legal services abroad, Clarke said many in the profession had expressed their ‘nervousness’ to him about next month’s changes.

But he gave his biggest indication yet that the coalition government is bullish about the prospect of liberalising the legal services market. In opposition, the Conservative Party appeared at best lukewarm about the full implementation of the then Labour government’s legislation.

The Big Bang refers to Margaret Thatcher’s deregulation of financial markets in 1986, which involved measures including abolition of fixed commission charges and the move to electronic, screen-based trading.

Clarke said comparisons between that process and the liberalisation of the legal market were ‘not far wide of the mark’.

He added: ‘The change will be quicker and more dramatic than many people are contemplating,’

Clarke emphasised that changes to legal regulation must continue to protect standards while at the same time increasing competition and offering opportunities for the global expansion of legal services.

The justice secretary also told an audience at Clifford Chance largely made up of commercial law firms that legal services must be given the same standing in the City as the nation’s banking services.

He added: ‘Law is an industry that has found itself to be looked at as an overlooked Cinderella by government. I want to make it clear that the City of London is not just one of the world’s great financial centres, it is one of the great legal centres as well.’

Clarke said improved infrastructure, particularly the new Rolls Building due to open around the end of the year, and litigation reform were key elements to spreading UK legal services into foreign markets.

The Rolls Building off London’s Fetter Lane will bring under one roof the Chancery Division, the Admiralty and Commercial Court and the Technology and Construction Court.

On the subject of cuts to legal aid, currently being driven through parliament, Clarke said the reduction in the budget was not ‘made lightly’, but was important to fix a system he described as ‘broken, unaffordable, terribly bureaucratic and inefficient’.

One of the biggest challenges to UK supremacy was now to ward off potentially destabilising legislation from Europe, most notably the European Commission’s proposals on contract law, which Clarke claimed would only complicate the business of international transactions.