How businesses can prepare despite Brexit deal rejection

Expert Insights

Businesses are yet again finding themselves in a time of uncertainty following two failed attempts by prime minister, Theresa May, to gain support for her Brexit deal. The EU granted Britain an extension to Article 50 on the proviso that MPs support the prime minister’s deal. However, with a lack of sufficient support it is unlikely that MP’s will vote on it for a third time and the prospect of a no deal Brexit is now a very real possibility.

Whilst business owners want to focus on how to grow their business, companies are having to contend with growing uncertainty and trying to safeguard their business without knowing what leaving the Single Market and the Customs Union will entail.

Despite the government’s indecision, there are steps that businesses can already take to prepare themselves.

Leading Cheshire law firm, SAS Daniels, has a team of corporate and commercial specialists based across its offices in Chester, Macclesfield, Congleton and Stockport who are advising businesses on Brexit.

Here, Kaye Whitby, Head of Corporate and head of the firm’s Chester office outlines the key considerations for businesses in our current Brexit situation.

Supply chains

Businesses need to consider not just events which may directly impact on them but also anything which may affect their supply chain. Business owners must consider not only the possible impact on their own ability to use goods or services purchased under a contractual arrangement (and whether the price they are paying will remain competitive) but also how the market for their own products may be affected. New or increased trade tariffs may be payable on both imports and exports, whether of raw materials, components or finished products. This may affect the costs incurred by a supplier or the market into which the customer sells the finished goods.

Export and import controls

Changes to export and import controls are possible but will depend on what form Brexit takes. Dealing with such changes may result in delays in receiving and delivering goods and raw materials which may well affect the ability to meet contractual time commitments and drive up costs. New restrictions may apply to the provision of services, whether to EU member states or other countries. Additional costs may be involved in complying with these restrictions, even if compliance is possible. Similarly, UK businesses may no longer benefit from EU-wide approval schemes, licences, consents or reciprocal arrangements between the EU and the rest of the world.

Currency Exchange Rates

Currency exchange rates and the uncertainty around the UK economy may result in fluctuations in the rate of exchange between sterling and other currencies. This may have an adverse effect on the value of sums paid and received under a contract.

Creating new contractual clauses

It is important to be aware that if, as a consequence of Brexit, the contract has become commercially unattractive or at worse, one of the parties may be unable to comply, they will still be bound by the terms of the original contract. Unless the parties are satisfied that their ability to perform the contract remains unaffected by Brexit, or the contract has been expertly drafted to expressly cater for such effects, the risk of not considering and planning for a potential consequence may well prove to be a risky strategy. Businesses would be wise to consider reviewing and, if necessary, redrafting their contracts to give the following options:

· Is there a provision already in the contract that can be relied on so that the affected party is able to renegotiate the contract so as to avoid the potential for a breach and an action for damages? Alternatively, is it possible to terminate the contract without penalty and on short notice if renegotiation fails.

· Consider redrafting standard contract templates to expressly provide for situations where the legal or business environment changes in the future, as a consequence of Brexit, which means the performance of the contract is impossible or difficult or it results in a price change or increased costs thereby reducing or eliminating the profit element. If this type of “Brexit clause” is included in the contract so as to trigger a change in the parties’ rights and obligations if the particular defined event occurs, such as a requirement to re-negotiate. Or if this is not possible the contract ends with little or no penalty and on a short timescale.

These types of clauses need to be carefully drafted, however, they may well prove to be a lifesaver for many businesses.

For more information please contact Kaye Whitby Partner and Head of Commercial Law at