Jessica Greenhalgh – solicitor in the Business and Employment teams – talks Brexit.

After a healthy upturn in the corporate/commercial legal marketplace in 2015/16, the referendum of June 2016 delivered Brexit. The High Court has of course recently ascertained the government alone does not have the authority to trigger Brexit and it must wait for a Parliamentary vote. The government will be appealing the decision in January….  time will tell.

Whilst there is a huge measure of “wait and see”, we do not know if or when Brexit will happen, and what it will mean for the UK.   We can however provide insight on how it has and may continue to influence North West SMEs from a legal perspective.

Immediate Impact

On a positive note, the referendum result has not had a negative impact on the FTSE in general terms.  However, the pound has dropped against the Euro and the Dollar.

How it has directly affected you depends on your business structure. If you run a business that exports goods from the UK the fall in the pound may make you more competitive. However, if you are importing raw materials or component parts from outside the UK you may suffer increased pressure as a result of the weaker pound.

Particular care needs to be taken if you are part of a supply chain and under a lot of pressure to deliver goods at a particular price.

It is more important than ever that you review your contracts and make sure you are protected.

Short-term

The short-term upside of the delayed impact has been that SMEs/OMBs have continued to trade with relative confidence and the North West M&A market has continued to thrive, unabated.  If your business relies on private investors this may cause difficulties as investors may choose to put new investments on hold which could damage the cash flow of your business.

If your business relies heavily on EU funding you will need to make provision for if/when this funding disappears. The expectation is that the government will step in and assume an equivalent role but we do not know to what extent they will assist and it is important to consider alternative funding options to reduce any risk.

Long-term

There is substantial conjecture on the agreement we have with the EU going forward. From a legal perspective, most EU laws do not automatically apply in the UK and have to be implemented by UK legislation. As such it is unlikely that the government will revoke any EU laws in their entirety although some parts may be challenged.

Companies that continue to trade with Europe will be forced to comply with the EU rules and regulations in any event.

If you are committing to a long-term contract be aware that Brexit could have an impact on its profitability. As such we recommend you consider the termination provisions in your contracts carefully.

From a corporate perspective, the law regulating companies is unlikely to change and if it does it will remove some of the more restrictive provisions that have been placed on companies through EU legislation.

The sale and purchase of companies at SME level is unlikely to be materially affected, indeed a weaker pound might lead to an increase in take overs by foreign companies.

There may be increased due diligence reporting to focus on the impact of Brexit and there maybe some added difficulty in securing funds given the market fluctuations but these are all challenges that can be overcome.

In conclusion

At this preliminary stage, it is not the gloomy scenario some commentators would like you to believe and, with certain precautions, we believe your business can continue to grow post-Brexit.

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