How will Brexit impact UK contracts and trading relationships?
28th July 2016
All businesses that trade with the EU, whether as a supplier or purchaser, will be affected. All contracts that involve the supply or purchase of goods or services to or from the EU will need to be assessed, as will those whose pricing or risk allocation assumes trade free access, EU funding or harmonised regulatory or licensing regimes. Market and currency volatility arising from Brexit has the potential to impact these and other arrangements.
Despite the fact that the future shape of the UK’s relationship with the EU will be unclear for some time, contingency planning involving contract review should start now with a view to managing risks arising from the initial stage of uncertainty in which we now find ourselves. Businesses will need to identify these trading arrangements, review standard contract documentation and embed Brexit risk identification and management into procurement processes. Key issues to consider, within a general commercial context, include:
- renegotiation rights or adjustment provisions to mitigate costs and management risks arising from regulatory divergence between the UK and the EU in the future, particularly where authorisations or licences are a contractual given
- review of pricing mechanisms which assume no tariffs, quotas or other barriers (non-tariff barriers being regulatory requirements, legal barriers and transaction costs) or which are tailored to take account of particular savings or levels based on EU free movement of goods and people
- the impact of market disruption and currency fluctuations on the cost of performance
- an analysis of the ability to perform if regulatory changes occur
- an analysis of terms that could be triggered against you because of Brexit circumstances