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Brexit - Planning for Uncertainty

on Thursday, 04 August 2016.

In the weeks following the Brexit referendum result, the main news focus was on the political fall-out and the Conservative and Labour leadership contests

Theresa May has become our Prime Minister. It is anticipated that she will take a leading role in any Brexit negotiations. She will be supported in this by her Cabinet team, which includes David Davies as the Secretary of State for Exiting the European Union.

What is clear and sensible, is that Government will want to push for some idea of what a post-Brexit deal with the EU might look like before invoking the now well-known and much debated Article 50 of the Lisbon Treaty.

Leaving aside the potential macro-economic effects of any future deal, a key question for any UK business that trades with the EU and around the world, is whether we stay inside the European Economic Area (EEA) -in which case it will be business  as usual with the EU, with  exceptions for agriculture and fisheries - the 'Norway Model' - or not,in which case a new bilateral trade deal will be required.

A third possibility is a half-way house, where as a trade-off for concessions on restricting free movement of people, we get more limited EEA access. This third way is unprecedented,  and for the moment political positioning requires that we must demand it, while EU leaders reject the notion of 'cherry-picking' its fundamental single market principles.

Inside or out of the EEA, we will still have to conclude trade deals with the rest of the world. We could re-join EFTA (Iceland, Liechtenstein, Norway and Switzerland), which has the benefit of trade deals with 37 countries plus the EU.

The uncertainty will persist for some time - perhaps we will have a better idea in six months, perhaps not. In the meantime however, there are practical steps to consider and strategic thinking that can be done so that you are in a position to react as likely outcomes begin to emerge.

Practical Steps

  • Do you currently employ EU nationals? You might want to reassure them of their current status. VWV have produced a Q&A guide
  • If you have long term purchase or supply contracts with third parties in the EU or elsewhere overseas, you can check if there are any provisions allowing for price variations if tax or custom duties vary in the future, and if the change in law provisions accommodate potential regulatory changes. If you are putting new arrangements in place, you should certainly ensure that they are future-proofed against Brexit-related change insofar as possible.

Strategic Thinking

This is hard to do in the current uncertain situation, but what you can do is identify those elements of your business that will be affected by changed trading arrangements, and appoint people to keep a watching brief on developments. Questions you might ask yourself include:

  • What business do we do with the EU and overseas at the moment?
  • How important is it to our business overall?
  • What could we do to find alternative customers or suppliers?
  • What are the threats and opportunities that face us, and our strengths and weaknesses?
  • What can we do to protect ourselves against those threats and weaknesses - either through our strategic direction, or through contractual protection?
  • Is this an opportune moment to review our vision and strategy?
  • Can we try to influence trade negotiations relevant to our sector, or changes in the way government support for our sector works post Brexit?

If you would like to discuss any aspect of Brexit, please contact the partner or lawyer you principally deal with, or any member of our Brexit team.

VWV Brexit Team

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