Out-Law / Your Daily Need-To-Know

Engage with government or risk being sidelined, expert warns businesses

Out-Law Analysis | 29 Sep 2017 | 4:05 pm | 2 min. read

ANALYSIS: Business sectors may find themselves out in the cold if they fail to seize the opportunity to communicate their concerns and outlines their aspirations for a post-Brexit UK to the government.

Some industries may take the view that the shape of the UK's future relationship with the EU is still too uncertain for them to justify lobbying the government, but this is not the case. Make no mistake, the next few months and years will consist of the most gigantic horse trade where the future of a large number of economic sectors and industries will be thrown in the melting pot.

There will be winners and losers out of this process, and industries which have acted now and managed to persuade the government about a particular line to take in the negotiations are likely to get a better outcome than those which have sat in silence.

In the former category, the regulated industries – particularly in cross-border regulated sectors like financial services - tend to be in a better position. This is in part because it has been obvious, right from the get-go, that Brexit will have a significant impact on those businesses, and they have been thinking about the potential implications from a very early stage.

We have been advising a range of businesses on the implications of Brexit for them and how best to respond to the challenges and, importantly, the opportunities which arise. We have found that, whatever their industry, businesses benefit from scenario planning, in which we consider the potential destinations where the UK might end up and work out the implications for their business of a 'hard' or disorderly Brexit, with no transitional agreement, at one end of the spectrum and a satisfactory negotiated settlement at the other.

Obviously, we don't know where on that continuum the UK will end up - but nevertheless, firms can look at the two extremes and the points in between and identify the commercial implications for their own business, and what they can be doing now to protect or enhance their position. This scenario planning is an incredibly fruitful exercise, as something almost invariably comes out of the discussion which had not been considered before and sometimes commercial opportunities emerge that had not been apparent beforehand. Even under the most extreme scenario, there are usually positives to be found.

Businesses should also be urgently examining and reviewing their commercial contracts to establish if they are fit for purpose. For example, some supply and distribution agreements and other commercial contracts contain territorial definitions, and it will need to be established if those definitions are still going to work in a post-Brexit world. It is also worth checking who bears the costs and risks of tariffs and non-tariff barriers being imposed post-Brexit under your contracts.

While there seems to be a tremendous appetite from politicians on both sides to avoid a disorderly Brexit, ultimately where we end up is going to be a question of negotiations between the two sides. If the UK exits the EU at midnight on 29 March 2019 without any type of transitional arrangements negotiated, and without any new agreement negotiated for future trade, things could get very disruptive very quickly unless businesses have put solid preparations in place in the meantime.

The tone adopted by prime minister Theresa May in her recent speech in Florence was a helpful one, and the speech contained some concrete steps forward regarding the role of the European courts, citizens' rights and the financial settlement. What business is hoping will happen next is real engagement on the detail between the two sides, allowing for the UK to be admitted into the more detailed negotiations on the shape of any future trade deal and also about the transitional arrangements.

Time is starting to run out, and the UK really needs to start engaging in these more detailed discussions quickly in order to ensure that there is an effective transition and a smooth handover.

Guy Lougher is a Brexit advisor expert at Pinsent Masons, the law firm behind Out-Law.com.