Is it time to Brexit-proof your business?

By Richard Coates, partner and head of dispute management at Freeths in Birmingham

It has been a tumultuous past month for the British car industry, with a number of major carmakers taking decisive steps to ‘Brexit-proof’ their businesses. We have seen Jaguar Land Rover announce that it is moving 2,000 staff at its Castle Bromwich plant onto a three- day week lasting at least until Christmas “in light of continuing headwinds impacting the car industry”.

This announcement was followed closely by the unexpected development that BMW will close its Mini plant at Oxford for a month after Brexit, although BMW were more explicit that this step had been taken “to minimise the risk of any possible short-term parts supply disruption in the event of a no-deal Brexit”.

Richard Coates

It is clear from these developments that that the British car industry is becoming increasingly unsettled by the lack of progress being made in Brexit negotiations and with less than six months’ until D-Day, many have decided they cannot wait any longer to take positive steps to ‘Brexit-proof’ their businesses.

The key questions for many in the British car industry and those who supply it, from the large carmakers to the manufacturers of specialist component parts, is what impact will Brexit have and what steps can be taken now to effectively prepare?

What impact will Brexit have?

In a nutshell, the impacts will be largely dependent on the nature of the deal reached between the UK and the EU. If, as now appears likely, we have a “hard” Brexit then the impacts on the British car industry will be wide-ranging. For example, it is thought that there may be significant supply-related problems with long delays at channel ports, the imposition of unfavourable tariffs and an increased regulatory burden, both in cost and in scope.

The cross-border supply chain is of vital importance to the British car industry and consequently, the impacts set out above will largely re-define existing buyer and supplier relationships. As a result, we expect to see UK-based companies increasingly seeking to re-negotiate cross-border contracts to more appropriately allocate the Brexit-based risks between the contracting parties.

What steps can be taken to Brexit-proof my business now?

In short, contracts with cross-border suppliers should be scrutinised as soon as possible to guard against your business losing its competitive advantage in the event of a ‘hard’ Brexit.

There are a number of ways in which your business can mitigate the risks of Brexit – for example, seeking the addition of flexible price adjustments into contracts in order to re- allocate the risk posed by price hikes from newly imposed tariffs. Further, so-called ‘force- majeure’ clauses, a contractual mechanism to deal with unforeseen events, can be expanded to deal with the initial disarray that is likely to occur in the immediate aftermath of Brexit.

Re-negotiation, and the post-Brexit environment itself, will inevitably result in disputes whether it is the interpretation of a contract or the re-structuring of your business. Freeths’ Dispute Management practice is well-placed to assist you in resolving disputes which may arise and we empower you to control the dispute rather than let it control you.

If you would like to discuss how you can take positive steps to ‘Brexit-proof’ your business now or if you would like advice on an existing or potential dispute, please call Richard Coates on 0845 128 7972 or alternatively email him at richard.coates@freeths.co.uk.

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