The UK’s separation from the EU forces businesses to re-evaluate their strategy.
Post-Brexit Game Plan
As Britain’s separation
from the EU looms
and their brokers
Now that the official wheels are in motion for the United Kingdom to leave the European Union by 2019, companies that have operations in the UK or conduct significant business there need to develop contingency plans for however the Brexit negotiations proceed. The UK government’s plan is for a so-called “hard” Brexit, meaning
that it plans to leave the EU single market and introduce some immigration controls
over people coming from the EU into the UK, said David Gent, legal director at
Bird & Bird in London. The UK would also no longer be a member of the EU
Customs Union, which could mean some trade tariffs between the UK and EU.
“The precise terms of trade between the UK and the EU will be uncertain until
a new free trade agreement between the two is negotiated,” Gent said. “There’s also
a possibility that the UK and EU will not be able to reach an agreement.”
There’s also uncertainty over what the terms of a potential trade deal may be
between the UK and the U.S., and how that might impact U.S. companies doing
business in the UK, he said.
“The UK is commonly used by U.S. companies as a gateway country to trading
with the EU, but after Brexit companies may want to rethink this, or if entering
the EU market for the first time, look at another country instead,” Gent said.
The financial services sector is expected to be particularly impacted, and many
firms may move jobs to mainland Europe, he said.
Many U.S. life sciences companies have also established their European
headquarters in the UK, and there’s been uncertainty about the future of the
regulatory environment, including the conduct of clinical trials and approval
procedures for medications and medical devices, said Sally Shorthose, a Bird
& Bird partner. Currently the UK regime is “intricately incorporated” in the
EU system, and the UK government has announced it would continue close
relationships with EU regulators.
“My discussions with pharmaceutical companies indicate that if the UK is not
part of the same regulatory environment, it would then become part of a third
or fourth wave jurisdiction to get approval for new medicines,” Shorthose said.
“If they have to pay once for EU approvals, they might not pay again for UK
approvals in a hurry.”
The demand for goods and services from all types of U.S. businesses might be
impacted by a downturn in the UK economy due to Brexit, as well as changes in
UK regulations, said Eric Siegel, a partner at Dechert LLP in Philadelphia.
U.S. exporters should consider currency hedges if the UK pound falls further
relative to the dollar, Siegel said. For example, a hedge that allows a U.S. business
to convert pound-denominated sales into a stable dollar amount, or a hedge that
pays off when the pound falls, could allow a U.S. business to keep its prices from
going up for UK customers.
BUILDING A PLAN
Aon Risk Solutions is now offering clients a three-step Brexit Navigator tool
to determine what could happen to
their risk management, insurance
and business continuity management
programs after Brexit, said David
Molony, a risk finance consultant
for the firm in London. Initial risk
assessments are based on how clients
are currently using the “four freedoms
of movement” that exist between the
UK and EU — goods, services, capital
and people — and how those freedoms
could change after negotiations.
The next phase of Brexit Navigator
“... The changing strategic profile
also changes the strategic risk
profile. As a result, we just want
to make sure the company’s
insurance and risk management
programs are performing at an
— David Molony, risk finance consultant, Aon Risk Solutions
• Brexit will restrict movement of
goods, services, capital and people
between the UK and EU.
• It could also cause a downturn in
• Businesses that operate in either
zone should establish contingency
plans as negotiations proceed.