BREXIT: Just one in four companies have Brexit plan, finds survey

Out-Law News | 10 May 2016 | 5:24 pm | 3 min. read

Only one in four businesses have a plan in place for dealing with the risks of the UK leaving the EU, a survey by Pinsent Masons, the law firm behind, has found. 

This is part of Out-Law's series of news and insights from Pinsent Masons lawyers and other experts on the impact of the UK's EU referendum. Sign up to receive our Brexit updates by email. 

A survey of senior decision makers at over 1,000 businesses across the UK, France and Germany by the firm found that only 26% of firms had a tangible plan in place for dealing with the risks arising from a so-called 'Brexit' vote. Just over half, or 53%, of respondents added that there had been no board level discussion about the potential commercial impacts of the 23 June referendum.

Guy Lougher, who heads Pinsent Masons' Brexit advisory team, said that many businesses may have been persuaded to do nothing until the result of the referendum emerged, given the "uncertainties" of a Brexit scenario.

"However, our advice to businesses is to start taking steps now," he said.

"While one cannot protect against all risks, it is possible to identify the risk areas and start thinking about how these could be mitigated. Many businesses now admit to being in denial during the Scottish referendum about how close the vote would be. People are more switched on this time, but I think find the prospect of Brexit a little overwhelming," he said.

The fact that 40% of UK respondents to the survey, conducted by YouGov on behalf of Pinsent Masons, had not yet taken any simple steps to establish the extent of the commercial challenges ahead of them should the country vote to leave the EU was particularly surprising, Lougher said. Only 14% of UK businesses had considered currency hedging, while almost all had not yet reviewed business-critical contracts to identify any legal ambiguities in the event of a 'leave' vote, according to the survey.

Lougher said that there were some "simple" things businesses should be looking at now, from assessing the extent to which their workforce could be affected by changes to freedom of movement rules to reviewing how and where customer data was currently held.

"Foremost among [these measures] should be identifying any business-critical contracts and considering if they are future-proof," he said. "Any agreements which specifically reference the EU as the territory governed by the contract may lack clarity. It is likely to be easier to agree amendments to those agreements now, especially where contracts have not yet been signed, rather than after a vote when the people on the other side of the table will know that the clock is ticking."

"It’s also surprising, given the potential for economic disruption, how few businesses have entered into discussions with investors and funders as to their attitudes to risk in the aftermath of a 'leave' vote. It would seem prudent to have those conversations now, amid relatively benign conditions," he said.

The survey did, however, reveal some differences in the extent to which different businesses had begun reviewing their operations and developing post-Brexit vote action plans. For example, 58% of respondents at financial firms said that they had had board level discussions, while 51% said that they had developed an action plan. Conversely, only 34% of construction firms had held board level discussions and only 27% had developed an action plan, according to the figures.

The survey also found that one in 10 UK businesses had discussed or made plans to relocate to another country should the UK vote in favour of leaving the EU. Again, financial services firms were more likely to have had these discussions, with 18% admitting to having done so compared to 9% of construction respondents, and 11% of telecoms or manufacturing respondents.

The survey also revealed a "remarkable level of consistency" in levels of readiness between respondents in the EU's three largest economies, Lougher said. However, businesses in France and Germany were more likely to have considered the commercial opportunities resulting from the UK leaving the EU than those in the UK.

"It is important to recognise that if the UK vote is in favour of leaving the EU, there will be profound implications for all businesses irrespective of whether they operate or trade in the UK," said Rainer Kreifels, head of Pinsent Masons in Germany. "A number of economists believe a vote in favour of Brexit would significantly impact the British and Eurozone economies."

"Our clients in Germany have already instructed us to review their material agreements under Material Adverse Change, recession and currency exchange aspects. Other German clients want us to help review the tax, intercompany and corporate arrangements of their UK subsidiaries," he said.

Christoph Maurer, the head of Pinsent Masons' Paris office, said that the commercial implications of the UK vote had "not yet infiltrated boardrooms across France", with almost two thirds of French respondents to the survey admitting that they had neither discussed the impact of a Brexit vote at board level nor developed a plan of action should the UK vote to leave.

"However, it is encouraging that almost a fifth, or 19%, of the French businesses we spoke to have started to identify commercial opportunities arising from Brexit, compared to just 13% in the UK. That might suggest that a number of French businesses see certain positives; however, probably not as many as the numerous negatives," he said.

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