Comment: Listen to your lawyers over preparing for Brexit
As a result, there remains significant uncertainty on the proposed transition period, before future trade discussions are even considered. Many companies have already triggered contingency plans for a no-deal scenario, but to fully enact those, they need a comprehensive understanding of their risk environment and to stress test the risks that will materialise in a range of different Brexit scenarios.
With this in mind, Pinsent Masons commissioned The Lawyer and YouGov to survey General Counsel (GC) and the boards of the UK’s largest listed and private companies to find out what boards expect of their GCs – the senior lawyers usually tasked with leading the operational response – when it comes to Brexit-planning and how well-prepared businesses are for Brexit.
Our report, Into The Breach: The role of general counsel in navigating a successful business Brexit, revealed that while 94 per cent of large company board members think they are very well or quite well-prepared for Brexit, only 53 per cent of GCs agree. In fact, GCs on the whole take a much more cautious view of preparedness and are seven times more likely than board executives to say their organisation is not particularly well-prepared or not at all prepared for Brexit (45 vs 6 per cent).
Of the board members that expect a detailed risk-assessment from their legal team, seven in ten expect their legal advisors to have shared this with them by June, but in contrast less than half (47 per cent) of GCs expect to be in a position to do so.
The research also found that 51 per cent of companies surveyed have already triggered contingency plans that assume a no trade deal or no transitional agreement scenario, and a further 40 per cent plan to enact plans by the end of 2018 on the same basis. These cover everything from non-UK subsidiaries switching to EU-based suppliers (35 per cent), to reducing investment in the UK (23 per cent) and moving jobs (15 per cent) out of the UK.
While 91 per cent of businesses say they expect to have triggered Brexit contingency plans for a no-deal scenario by the end of this year, this is not necessarily because they foresee a worst-case scenario outcome from EU/UK negotiations, but because their size and scale means they cannot afford to wait for clarity on the final shape of the UK’s post-EU status.
In some sectors – financial services and other highly-regulated sectors being obvious examples – businesses are being warned by their regulators to act early. For others, the lead times are sufficiently long to mean that Brexit-related actions cannot be left until later in the day. In either case, delaying action is not a feasible strategy.
Our research found a gap in sentiment between the boardroom and their legal advisers, with executives generally bullish about their levels of preparedness for Brexit, whereas their advisers are perhaps understandably more circumspect. The key is an open and regular dialogue. Whether it is scenario-planning, risk-assessment or risk-reporting, board members want their GCs to be heavily involved in Brexit preparations. However, there is no existing roadmap to success.
Boards need to clearly outline what they expect from their GCs with regards to Brexit-planning and risk-assessment, and to specify clear deadlines. In parallel, GCs need to be proactive in notifying boards of major Brexit risks and must also not be afraid to tell boards if the business’ preparations are not sufficient.
Every organisation needs to make the most of expertise available, ensuring it tackles the Brexit process in the best-prepared, most well-informed way possible. There’s only one chance to get this right.
Guy Lougher, partner and head of Pinsent Masons’ Brexit Advisory Unit.