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Brexit - Maintaining Flexibility in a Changing Landscape

on Friday, 13 January 2017.

We don't think there's any value in lawyers speculating on what Brexit will mean for you, other than to say that it will, at some point in the next few years, mean change.

Change in the trading landscape which we all currently operate in. Change in the laws that we have to work within. Change in the economic environment that we are faced with.

What will that change look like?  We have no idea.  We suspect that at this stage our Government doesn't have much idea either.  But that doesn't mean that there is nothing that you can be doing now to ready yourself for that change.

The impact of Brexit is likely to be felt on the arrangements which companies have in place with each other - particularly where those arrangements move outside of our region and across borders, or where there is reliance on an overseas supply chain, European labour, etc. That impact might be felt directly (for example, in the imposition of trade tariffs and customs barriers) or indirectly (perhaps through increased labour costs). And of course, the impact could be positive or negative (or most likely a mix of the two)

You may not be able to predict with any confidence exactly what the changes, and their effects, will be. But you should be considering how best to maintain flexibility in your contracts to adapt to those changes, whatever they look like.

How do we keep our contracts flexible?

You should consider whether to push for the right, in new contracts being put in place, to:

  • adjust the commercial terms if Brexit affects the costs of servicing the contract
  • bring the contract to an end if Brexit changes the commercial viability of the arrangement
  • provide for a mechanism to renegotiate key provisions where the contract is affected by changes to legislation or regulation associated with Brexit

This will be appropriate for some, but not all, contracts. The risk is greater with higher value, long term arrangements - they should be your primary focus.

What about our existing contracts?

You should consider dusting off your existing contracts, and thinking through whether they give the flexibility to deal with changing circumstances (perhaps through change in law or force majeure provisions).

There may be limited scope to change these arrangements now - but better to know that now, and manage the contract accordingly. The contract may provide levers which you can pull to shield yourself from the effects of change - by identifying what those levers are, you will be in a better position to pull them.

Of course, we have always been exposed to the risk that laws may change, and to the increased costs of complying with those changes. However, we currently have a situation where the potential changes are so numerous, and so fundamental to the way in which the UK does business, that it is prudent to give yourself the flexibility to mitigate the effect of those changes - whatever they may ultimately look like.

For more information please contact Ed Rimmell on 0117 314 5232.

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