[Commercial] Brexit - Update
02 October 2020
As the end of the transition period is getting closer, negotiations between the UK and the EU are ongoing but, according to the EU’s chief Brexit negotiator, there remain “significant differences” between the two sides.
So what does this mean in practice for businesses with
operations in both the UK and the EU?
It remains a possibility that no deal will be reached by the end of the transition period yet many businesses are not fully prepared for a no deal situation, particularly as Brexit planning has been put on hold by lots of businesses due to the COVID-19 pandemic. It is now very important for businesses that may be affected to step up their planning.
In considering the impact on your business, much will depend on the industry you operate in and the nature of your business but the following (non-exhaustive) considerations may be a useful starting point:
1. Border/customs tariffs: the impact of tariffs will be particularly relevant to companies involved in importing from the EU and exporting to the EU. It is a good idea to map out your supply chain to identify where there are likely to be issues even if you are not directly involved in importing/exporting because you may be indirectly affected by issues elsewhere in your supply chain. Consideration should also be given to the likely impacts on new contracts or arrangements.
2. General impacts on supply chains: in addition to the possibility of tariffs, other potential effects on companies involved in importing or exporting include increased administrative costs due to additional administration requirements, delays and increased costs due to disruption at ports and controls on imports and exports. Understanding what the effects on your operations may be and the extent to which you may be affected is key.
3. Regulatory changes: the impact of regulatory changes as a consequence of Brexit will differ by sector and will include changes to the way products are labelled and product safety standards.
4. Effects on the economy: the effect of a no-deal Brexit on the economy is likely to be significant and will most likely have immediate effects on many companies. In practical terms, it is important to consider how this may impact your business and what steps you can take to mitigate the risks.
Undertaking an audit of your business in order to identify any key issues or areas of risk will assist you with putting in place mitigation strategies to protect your business. Whilst the position after 31 December remains unclear, focusing on the ‘worst case scenario’ of a no deal Brexit is likely to be the best strategy for the time being. Some mitigation strategies, such as identifying alternative suppliers or re-negotiating contracts are likely to take some time to put in place and so it is advisable not to wait until the position is clearer but to commence your planning sooner rather than later.
Over the coming months, 3CS will publish further updates regarding Brexit and steps businesses can take but if you require any assistance with your Brexit planning or assessing the impact it may have on your business, please contact the 3CS Commercial Law team which can advise accordingly.
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