Commercial contracts and Brexit, An insight into the potential impact
On 2 October 2016 Theresa May announced that Article 50 of the Treaty on European Union will be triggered before the end of March 2017. If you trade with the EU your business will be affected. Now is the time for you to start preparing for Brexit by reviewing key existing contracts and future proofing any new contracts.
The commercial effect of Brexit is likely to be felt in different ways. Any of the following may occur:
- changes to exchange rates
- tariffs being imposed on goods and services in and out of the EU
- custom checks for goods entering and leaving the EU if the UK ceases to be part of a customs union with the EU
- labour shortages leading to heightened labour costs as a result of restrictions on the freedom of movement of people
- businesses no longer requiring the benefit of a contract due to relocation plans.
Any of the events listed above have the potential to make performance of a contract more difficult or even result in the contract becoming loss making. It is unlikely that a contract will provide for any relief in these circumstances.
The exact implications of Brexit are of course unknown at this stage and there is no denying that that the UK’s relationship with the EU will remain uncertain for some time. You should therefore take the follow practical steps to assess the areas of risk posed by Brexit:
- consider how Brexit could affect your business;
- identify key contracts to assess whether they provide sufficient protection against Brexit; and
- renegotiate or amend contracts where necessary so that the implications of Brexit are more clearly dealt with.
The Commercial Services Team at JCP Solicitors can assist your business in taking steps to ensure that it is ready for Brexit. If you require further information or assistance please contact us.