January 24, 2018

Are you Brexit ready?

While Brexit negotiations proceed into phase 2, industry is already thinking ahead to ensure that, whatever the outcome, business is as ready as possible for any change. But what can be done now, in the absence of any firm agreement on what any transitional period or future trading relationship between the UK and its EU partners could look like?

There are a number of immediate and longer term steps to ensure that you are prepared and have maximum flexibility to respond to what could be very considerable change.

Short term
Operational certainty is key. As there are still a wide range of possible Brexit outcomes, businesses are already looking at different scenarios.  In particular, a full withdrawal from the EU single market and/or customs union could create significant financial and people based impacts and opportunities. While it appears likely that there will be some form of transitional period, this is likely at this stage to be time limited and so the steps set out below will be relevant to all types of commercial entity.

What can you do now to be Brexit ready?

  1. Ensure Board awareness of possible Brexit impact. Any transitional exit arrangements could be particularly time sensitive. One or more internal teams should focus on monitoring and reporting on Brexit issues. By working with legal and other teams, contractors can monitor the developments in legal and regulatory change, create risk registers and raise the profile of specific issues within the organisation. 
  2. Supply chain and people mapping. Cost/risks in supply chains and access to workers could change post-Brexit, depending on single market access and the transitional arrangements in relation to free movement of people. Contractors should be starting to review and amend key contracts, refresh supply chain relationships, and/or identifying potential new suppliers.

  3. Contract health checks and future proofing.  New and, potentially, existing long-term contracts should include so-called ‘Brexit clauses’ to deal with changes to, for example, territorial definitions, force majeure and/or change in law provisions. Public sector contracts may need particular focus on change mechanisms and/or payment mechanisms in PFI to reflect any increased cost of delivery due to tariffs, supply chain cost increases or difficulties in recruitment.

Longer term
The future will become clearer as the political and technical negotiations are concluded. While a transitional arrangement would avoid a ‘cliff edge’ for business, it means that legal and regulatory change could continue for many years. Key steps could include:

  1. Implementing practical change. A detailed programme of change could focus on the highest value, business critical contracts and issues. These could include changes to reflect, for example, the impact of any tariffs on supply chains; migration restrictions, and intellectual property.
  2.  Regulatory restructure. Brexit could result in requirements on contractors to establish new local presence(s) in the EU to operate. This could involve creating new entities and/or developing existing relationships/partnerships.
  3. Updating policies, procedures and risk management. Contractors (particularly those working with the public sector in the UK and the EU) will want to ensure that all of its people and policies are updated to fully implement whatever change comes next.