Following an historic vote by MPs last week to take control of parliamentary business and block a no-deal Brexit, many commentators have reported that the latest economic health check suggests the UK economy is shrinking and falling into recession with Brexit uncertainty driving down the UK economy. Markit’s All Sector Output Index indicates that the private sector shrank last month, due to heavy falls in construction and manufacturing and new business growth in service sector companies slowed abruptly. Many have reported that new exports have stalled as more and more overseas clients delay spending decisions until there is more political certainty. The ongoing uncertainty has knocked business confidence too, which fell to its lowest level since the 2016 EU referendum.
So how do business owners protect their business during this difficult period? Is it possible to Brexit proof your business?
We are told that over 40% of UK businesses have begun no preparation for Brexit. However, there are some practical ways to protect your business: –
This is the first step. Most businesses will have already felt the negative impact of Brexit uncertainty as people spend less and delay decision making. This means that every business will have to work harder to generate profit.
History has taught us that those businesses with cash reserves can adapt to survive periods of uncertainty and recession.
Get in touch with new companies and explore potential new relationships. Can you sell overseas? If you sell in Europe perhaps you could sell further afield e.g. China, Canada or USA. The more new customers you have, the more resilient your business will become. It is also important not to write off your existing EU relationships. Although it may be more challenging to export, it won’t be impossible.
Those companies selling services or digital products have an advantage as they do not need to consider the physical movement of goods between countries and ports. However, if you are involved in manufacturing and production consider whether you can sell your design or licence any of your intellectual property rights to another overseas company. Have you considered entering into a joint venture with another company?
Minimise staffing costs by implementing a work from home rule. Staff love the trust and flexibility and you can recruit from anywhere in the world. Staff are more productive and you pay for less office space. Make sure that you get the right legal advice before contracting with workers abroad as different rules apply in different jurisdictions.
If you trade with the EU check the government guidelines and do what you can to apply these to your business. These guidelines deal with movement of goods, product compliance, contracts, people and financial planning.
Technical barriers can be an even bigger barrier to trade than tariffs (e.g. rules affecting packaging or labelling). Although UK standards and regulations will be aligned with the EU at the point of exit, it is possible, if there is no deal, that the UK certification may cease to be recognised in the EU. You should check the relevant government guidance.
Check your existing contracts to see if they might need to be renegotiated or terminated as a result of Brexit. Are any contracts due for renewal? Consider whether you should you start negotiating heads of terms now.
Existing UK employees who are EU nationals will need to apply for settled status.
If the UK leaves the EU without a deal, organisations that process/transfer the personal data of EU citizens from the EU to the UK may need to take action to continue the free flow of data from the EU to the UK and protection of EU data subjects. Again check the relevant government guide to understand the actions that need to be taken in preparation.
Always remember to seek expert legal and accountancy advice from the outset when introducing any changes to your business e.g. negotiating contracts, joint venture agreements, contracting staff overseas, agent agreements or GDPR.
Catherine Cooney, Partner with Worthingtons Solicitors advising charities and businesses on a daily basis. Regularly advising on charity trustee duties and liability, good governance, mergers and collaborations, serious incidents, concerns and insolvency. For any business law advice please telephone 02890279500 or email firstname.lastname@example.org.
Call 028 9043 4015 or Contact us