It is hard to prepare for something most of us thought would never happen, but there are practical steps you can take now.
Here are 10 ways to help your business prepare for Brexit.
1. Intellectual property
There’s still a question mark over EU trademarks and whether they’ll still be protected in the UK after Brexit. We expect the government to put measures in place to ensure that they are, but it’s not yet clear how these will be implemented.
If the UK is an important market for your business, our advice is therefore to file a UK trademark application in parallel with any new EU trademark application. If the UK will be your only European market for the next five years, apply for a UK trademark only.
Also consider backing up any EU trademarks that have been registered for more than five years and only been used in the UK. This will help counter any challenge to the EU trademark on non-use grounds after Brexit.
Regarding patents, the UK government has said that despite Brexit, it still intends to ratify the single European patent agreement. This new system is expected to come into effect by the end of 2017 and will offer businesses a cheaper and easier way to obtain and enforce patents.
The purse strings are already tightening on R&D and grant funding that is funded in whole, or in part, by EU budgets. If your business relies on this funding, consider developing long-term fundraising strategies which assume those grants will be limited.
If your cost base is mainly in the UK, where possible, try to agree funding in sterling rather than dollars or euros to protect against possible income fluctuations.
If access to funding is crucial to your business, you should also consider establishing an EU entity.
So far, it seems likely that the UK government will preserve employment rights that derive from EU law.
It also looks likely that EU nationals who are already resident in the UK will be allowed to stay. Future business-related migration, however, could be harder and may be brought into line with the process of bringing in employees from outside the EU. In the immediate aftermath of the Referendum, the government restated its commitment to science and research. This suggests that different immigration rules may be created to allow the continued free movement of scientists and academics from the EU.
If you employ EU nationals more generally, consider the potential impact of this on both your current and future employees. Put in place a robust workforce and contingency plan, particularly for key roles. If any grant funding agreements refer to individuals who have recently arrived from the EU as ‘key personnel’, seek to renegotiate.
Our advice is not to pre-empt any major changes to your employment contracts and handbooks until the post-Brexit employment landscape becomes clearer. It is probable that, following the publication of the Taylor Review later in 2017, there will be a more active debate on how to engage people in the workplace, so this will be the time to review your employment models and assess the likely impact of employment law changes.
In the very short term, also consider the impact of other issues such as the Gender Pay Gap Reporting Regulations that take effect on 6 April 2017 and check your employment policies and procedures are fully up to date.
4. Data protection and GDPR
Continue to operate on the assumption that your business will be subject to current laws as well as any forthcoming changes which derive from Europe, such as the General Data Protection Regulation (GDPR).
Businesses should look at internal processes, policies and procedures to ensure they are fit for purpose, when what was a transfer between two EU member states becomes subject to the international data transfer regime (which could mean different regulations for the UK).
With the GDPR remaining on the horizon, businesses still need to establish safeguards to all data processing activities and a clear process for notifying breaches, including a response plan. You may also need to update your internal and external policies so that they are transparent and easily accessible. Also, if you haven’t already, consider appointing a Data Protection Officer and producing a template privacy impact assessment. Compliance with the GDPR should remain one of the key priorities for all businesses.
Your contracts may contain provisions and mechanisms that are triggered by a major event like Brexit. These bear traps can be found in ‘Force Majeure’ clauses for example, termination events or even currency fluctuation provisions, so identify any contractual relationships that might be directly affected. In some circumstances, a contracting party may want to use Brexit to renegotiate or terminate. If you have a large contract portfolio, software can be used to search for these provisions to simplify the process.
Regarding currency, it’s likely that there will be some volatility in the price of sterling and the euro on and around the time when the UK exits the EU. Where appropriate, consider implementing measures to mitigate these currency fluctuations, for example, amending pricing structures in your contracts, so that they allow for flexibility if there are significant changes in currency values.
6. Import and export
If you trade with the EU, review your contracts and start to prepare contingency plans for tariffs and export controls on the sales of goods and services to EU countries. This could involve amending the wording of clauses to state that prices are exclusive of VAT and any applicable tariffs.
Also consider whether you want to make long-term commitments. For new contracts, ensure they give you the right amount of flexibility as the UK’s negotiated position emerges. For existing contracts, consider taking advice on potentially amending them, so that you have the right to terminate or re-negotiate if the trade deal doesn’t suit you.
7. Mergers and acquisitions
If you’ve exchanged and completed a deal, check your contract to see whether Brexit could trigger any clauses which would allow the acquirer or funder to pull out.
If you’re worried about how Brexit could affect your balance sheet, review any finance agreements and establish whether any dip in performance could result in you having to make a repayment or terminate your contract. Also think about whether Brexit and any resulting impact on your trading performance could trigger warranty claims or affect earn-out mechanisms.
Corporates with UK or EU-based subsidiaries which are considering restructuring after Brexit are advised to review any acquired assets and contracts, to check whether they can be transferred within the group. A good starting point is to read the due diligence reports produced when you entered into the deal.
8. Current negotiations
If you’re currently negotiating a deal, take a step back to check contract terms for EU references and how these could affect your obligations. Also assess whether financial forecasts remain viable, particularly given potential currency fluctuations before and after Brexit.
If your workforce is likely to change after Brexit, start thinking about your office needs now. Will they grow due to new opportunities in the global market place, or reduce? Consider checking your lease and reviewing any break options. Finding the right space for your business takes time, so start looking sooner rather than later.
If you’re signing up for new space, make sure that flexibility is built into the contract so that you can break the lease if your property needs change.
Landlords should be prepared to offer tenants concessionary deals to make sure their buildings are fully let if there is a dip in the economy or a fall in demand in a specific occupier sector.
Optimism for a thriving post-Brexit UK economy is good, but it’s crucial to carefully consider how current and future tenants have planned for the post-Brexit market. Consider rent deposits or guarantors, particularly for risky ventures.
10. Joint ventures
Organisations should review the terms of any joint venture or partnership agreements with EU entities. If any agreements are dependent on the UK being part of the EU, seek to renegotiate or iron out any potential issues. Alternatively, consider negotiating termination rights and/or pay-back provisions which could help you to mutually agree a managed exit from the arrangement while minimising the fallout.
Although two years of negotiation lie ahead now that Article 50 has been triggered, preparing now is key. By taking a step back to review your operations, contracts and workforce (and planning accordingly) your business will be in the strongest position to manage the challenges and opportunities that Brexit will bring.