The dust may be slowly settling around the UK’s decision to leave the EU, but the uncertainty of the potential changes and impacts on business relationships remain top of mind.
Many technology companies are uncertain how Brexit will impact their company and the day-to-day running of their business. Following the economic shockwaves that trailed the UK’s vote to leave the European Union over two months ago, the fear of the unknown has left many businesses feeling nervous as they start to encounter the ripple effect of the decision.
Between stock market turmoil and the potential for other EU countries to follow suit, businesses are left on the side lines wondering what their next move should be - some feeling paralysed and others rushing to protect themselves. One in five business leaders are even considering moving some of their operations outside of the UK, a recent survey by the Institute of Directors reported. In addition, a quarter of the members polled were putting hiring plans on hold, while 5 per cent said they were set to make workers redundant.
Another recent survey by the Business Growth Fund found that 54 per cent of the 450 people surveyed said that continued access to the EU single market must be a priority for the UK in future discussions with Europe. While nine in ten business leaders expect the referendum result to lead to a short-term fall in economic growth.
Brexit will prompt changes in governing law, currency and exchange rates, logistics, and trade rules, making it critical for UK technology companies to prepare for the inevitable.
Following the UK’s withdrawal of the E.U., one thing is certain. Brexit will impact every business that trades with the E.U., whether a supplier or purchaser. The very meaning of the phrase “English Law” will change, thus altering the underlying basis for business relationships. Since many existing contracts contain clauses pertaining to the UK’s membership of the EU, thousands of legal agreements will need to be adjusted in order to remain compliant, as well as ensuring the necessary risk protections are in place. Any company with a EU/UK engagement will be impacted, either directly or as part of an extended supply chain.
Foreign exchange and currency issues could impact the commercial benefits in contracts as a result of Brexit. Companies involved in the global delivery of goods and services should be wary of how significant variations in the currency markets will impact their business performance, as well as ensuring all invoicing provisions tied to the Euro or the Pound are reviewed. In certain circumstances, dramatic changes in valuation could also trigger termination, invoke provision protection or risk a shift in ownership. Brexit could also affect the profitability for an organisation to produce a product, forcing them to solicit force majeure or termination clauses. As for the sourcing or procurement side of businesses, all goods and services necessary to keep the lights on and keep up momentum are at risk for termination.
In addition to currency and exchange rate changes, Brexit could impact trade rules, including tariffs and territory provisions. If a company is trading services or goods with EU member states, contracts may well have been made with no consideration for tariffs or barriers, thus impacting operations by altering the organisation’s ability to deliver per the requirements of that contract. Any contracts with territorial provisions, such as for distribution or licensing agreements, or invoicing giving specific rights to the Euro or the Pound, should be reviewed to see if the necessary risk protections are there. If found, the company will need to create a separate contract to cover the UK, which could potentially alter the revenue or cost of the original agreement.
Movement of goods and services
New UK laws could also drastically affect logistics if changes occur in the movement of goods and services coming in and out of the UK. Brexit could restrict a company’s ability to find the technical talent they need in certain locations due to border crossing changes and visa applications which could limit the free movement of people. In addition, Brexit could cause delays and inspections at border crossings, which is critical to a tech business’ production and delivery of their product. Brexit could also impact import/export tariffs as well as the underlying economics of a contract, including trade, immigration and agricultural subsidies. In anticipation of these changes, tech companies should start to evaluate how these elements are defined inside their contracts.
Furthermore, agreements based on the assumption of free labour could affect delivery expectations for time, cost and quality. Previous provisions or rights for the EU are no longer applicable to the UK, requiring technology companies to issue revised or completely new contracts to cover the UK.
Next steps: Preparing for Brexit
Business relationships are defined by contracts between organisations, which is why it is critical for companies to know what is inside those contractual documents. This insight is the first step toward addressing the changes Brexit will require, but it is also a manual time-consuming one for many companies. By using contract discovery and analytics technology to extract metadata and clauses through a sophisticated search review, businesses can quickly understand what is in their existing contracts and identify which need attention - all without disrupting day-to-day operations.
As the challenges and opportunities for technology companies, ahead of the UK’s departure from the European Union start to emerge, the definite changes are still unknown and the timing is unpredictable.
The Business Growth Fund survey found that 74 per cent of respondents felt that the UK remains a great country in which to do business, and to start and grow a business. Confidence in the UK will be important moving forward, and businesses should begin to reduce uncertainty by preparing for all possibilities. This is absolutely imperative, failing to plan could leave your company paralysed after new laws take effect.
Toby Hannon is Vice President of Seal Software in EMEA and has been with the company for just over a year. Previously, Toby held several management positions in General Electric (GE) Procuri, CombineNet and SciQuest.