The UK has voted in a referendum to leave the European Union.
The outcome of the referendum and the on-going political debate continues to receive significant profile. Whilst most of the practical consequences for business are currently uncertain, they are potentially significant.
In managing the impact of the referendum result and preparing for the potential next steps it is important to ensure both internal and external stakeholders are accurately informed.
We have a range of briefing materials and presentations available which can be tailored for use with a range of audiences (find out more at www.hoganlovells. com/brexit). This paper summarises some of the key points to address in any information strategy.
Brexit will potentially have a significant impact on any business with operations, customers or suppliers in the UK or EU. Ensuring communication of the right information and analysis (and where appropriate opinions) is therefore important for a number of reasons:
- Brexit and the Brexit process have the potential to create significant risks for many businesses. Those risks may include loss of an ability to carry on some elements of business in its current form, additional costs (for example in the form of new tariffs or the requirements of new regulatory or legal regimes), loss or redeployment of key staff and damage to supply or distribution chains. It is important that these risks are understood;
- Whilst there is significant uncertainty as to the details of the withdrawal process, timing and the eventual shape of the UK's relationship with the EU (and any changes to the EU itself), it is important to start preparing. This means ensuring that the range of possible outcomes is understood so that an initial assessment can be made as the potential impact on various aspects of your business and possible mitigation strategies;
- The referendum result, the political fallout and press reporting have created significant concern and uncertainty. Whilst this cannot be eliminated, it is important to ensure people have the facts, to provide reassurance where possible and appropriate, and to counteract the potentially damaging impact of rumour and misinformation;
- The Brexit process is fluid and the outcome depends on the position taken by a range of players including the British Government, governments of other EU Member States and the European Commission. Issues still to be determined range from the macro (will the UK continue to have a "special relationship" with the EU) to the micro (how will very specific activities be addressed in regulation and trade). Well-informed businesses have an opportunity to try to influence the outcome in areas which matter to them; and
- Brexit is not simply a threat. There are also potential opportunities for business which include exchange rate movements, possibilities to restructure for the better, and the prospect of new UK free trade agreements with non-EU countries. A proper understanding of the landscape is important to understand how to capitalize on the opportunities.
A practical response strategy
This note addresses one element of a practical strategy to respond to Brexit. Your overall strategy should cover the following key elements.
Organize a "Brexit Taskforce" to capture insight from across your business.
Inform your Board and wider business of the possible implications of Brexit and the approach your business is taking to it.
Analyze potential impacts or changes that your business would like to drive.
Capitalize on opportunities generated by uncertainty and change.
Prepare by taking steps to mitigate potential risks and developing a detailed plan to move quickly as clarity emerges.
Monitor developing thinking in London, Brussels and elsewhere.
Engage with government in the UK, EU and beyond, as well as with other key stakeholders.
Further details on this overall practical response strategy are available in our Brexit toolkit at hoganlovells.com/brexit
Who to talk to?
Given the breadth of the potential impacts of Brexit you should consider briefing a wide range of stakeholders including:
- The Board of Directors and key management;
- Shareholders, lenders and other finance parties particularly if Brexit or the Brexit process may have a material impact on your business or create material risks;
- Employees and contractors (particularly those who may be personally affected by Brexit);
- Industry bodies and partners with whom you may share common interests (having due regard to the application of competition law, particularly when talking to competitors);
- Suppliers and customers who may be directly affected in ways which might indirectly affect you or who may be affected through their relationships with you; and
- Policymakers, regulators and wider opinion formers who may be able to shape the impact of Brexit and the Brexit process on your business.
Whilst the information and approach for each of these groups will vary, it is important to ensure consistency in you overall approach.
What to say?
Depending on the audience, there are a range of issues you need to consider covering including:
- The facts about what has (and has not) happened: the UK remains a member of the EU; no formal process to leave has started; no legal changes have yet happened (Vote is Leave...the journey begins -- unravelling the uncertainty).
- What we know about the next steps: the only legally defined exit process (Brexit -- What now? The legal process of leaving); possible models for the UK's future relationship with the EU (Possible models for the UK/EU relationship); the potential impact on UK law (further information to follow on www.hoganlovells.com/brexit);
- Immediate issues to focus on: the risks and opportunities of uncertainty and market turbulence individuals' immigration status and business's legal obligations are currently unchanged; can existing contracts be revisited and should new contracts contain "Brexit clauses" (Brexit clauses);
- Areas of your business which could be directly or indirectly impacted and need to be assessed in preparation for possible outcomes (Analyze: a Brexit health check): potential regulatory and legal changes; new tariff and non-tariff barriers to UK/EU trade; lost access to current EU third country free trade agreements benefitting the UK;
- Possible impacts on stakeholders and third parties, whom you may need to make aware of risks, provide reassurance or commence discussions to agree potential mitigations: shareholders; employees; lenders; customers; suppliers;
- Areas of opportunity which Brexit may create for your business: new M&A and deal opportunities (Capitalize: Brexit and UK-related M&A); and
- Opportunities to influence the outcome of the Brexit process or the future legal and regulatory landscape (Engage: policy engagement): ensuring policymakers and regulators prioritise your areas of concern; mitigating potential change; securing optimal future policy development.