Guy Lougher: Engage on EU exit or be sidelined

Guy Lougher, Head of the Brexit Advisory Team at Pinsent Masons,
Guy Lougher, Head of the Brexit Advisory Team at Pinsent Masons,
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Guy reckons clients need to get involved in the coming horse trade over Brexit.

While pressure mounts on the UK government to reveal the details of their proposed exit plan from Europe, some business sectors may find themselves out in the cold if they fail to seize the opportunity to communicate concerns and outline aspirations.

Our firm’s cross-disciplinary Brexit team is advising clients on the implications for their business and how best to respond to the challenges, and importantly, the opportunities which arise.

My advice to businesses and organisations in all sectors is that there is a real need for them to engage with government, not least because there will be winners and losers out of the process.

Some sectors take the view that things are too uncertain to be able to engage, but this is not the case, as even now one can have a view of the possible destinations where we might end up. The ­regulated sectors tend to be better positioned, ­particularly cross-border sectors like financial services, and this is in part because, right from the get go, it has been obvious that Brexit will have an impact on these businesses and they have been thinking about it from a very early stage.

Make no mistake, there is going to be the most gigantic horse trade, where a large number of economic sectors and industries will be thrown in to the melting pot, and those which have managed to ­persuade government about a particular line to take in the negotiations are likely to get a better outcome than those industries which have sat in silence.

We find clients benefit greatly from ­scenario planning, working out the implications for their business in a hard Brexit or a disorderly Brexit with no transitional agreement at one end of the spectrum, and a satisfactory negotiated settlement at the other.

We don’t know where we are going to end up on that continuum but, nevertheless, they can take the two extremes and the points in between and identify the ­commercial implications and what they can be doing now to protect or enhance their position.

This scenario planning is a fruitful exercise; there is almost invariably something which comes out of the discussion which had not been thought of before, and sometimes commercial opportunities evolve which had not been apparent beforehand. Even with the most extreme example, there are usually positives.

Businesses should also urgently ­examine and review their commercial contracts to establish if they are fit for purpose. For example, some commercial contracts such as supply and distribution agreements contain territorial definitions and it will need to be established if those definitions are still going work in a post-Brexit world. It is also worth checking who bears the costs and risks of tariffs and non-tariff barriers being imposed post-Brexit.

Listening to politicians on both sides, there seems to be a tremendous appetite to avoid a disorderly Brexit but where we end up is going to be a question of negotiations. If there is an exit at midnight on 29 March, 2019, without any type of transitional arrangement negotiated, and without any new trade agreement for future trade, unless businesses have put preparations in place, things could get very disruptive very quickly.

Prime Minister Theresa May’s recent speech in Florence helped in terms of tone and there were some concrete steps forward regarding the role of the European Court, citizens’ rights and the financial settlement.

What business is hoping will happen next is a real engagement between the two sides, which allows for the UK to be admitted in to the more detailed negotiations on the shape of any future trade deal and also about the transitional arrangements.

Time is starting to run out and we really need to start engaging in those detailed ­discussions quickly.

Guy Lougher is partner and head of the Brexit advisory team at legal firm Pinsent Masons.