More than half of FTSE 100, FTSE 250 and similarly-sized companies companies have already triggered contingency plans that assume a no trade deal, no transition agreement scenario, according to a Pinsent Masons report.
The report, ‘Into the breach: The role of general counsel in navigating a successful business Brexit', published this week, is based on surveys in January with 100 general counsel (GCs) and in February with 100 board members. The contingency plans cover everything from non-UK subsidiaries switching to EU-based suppliers (35%), reducing investment in the UK (23%), and moving job roles (15%) or operations (14%) out of the UK. A further 40% plan to trigger Brexit contingency plans by the end of 2018 if no trade deal or transitional arrangements have been agreed.
According to the report, GCs are playing a pivotal role in preparing their businesses for Brexit, with 57% of board members viewing their GC as a strategic advisor in terms of explaining risks and opportunities. One in four board members would welcome an even greater role for their GC in deciding issues of risk management and operational issues during transition and post-Brexit.
However, the report highlights a discrepancy in attitude—94% of board members believe their business is very well or quite well prepared for Brexit, but only 53% of GCs agree.
GCs also find themselves racing to meet expectations—seven in ten board members expect their legal team to have provided a detailed Brexit risk assessment by June. Less than half (47%) of GCs expect to be able to do this by that date.
Guy Lougher, partner at Pinsent Masons, said: ‘Many of the corporate coping strategies for Brexit are inherently legal, so UKPlc is looking to its most senior lawyers for leadership like never before.
‘91% of businesses surveyed expect to have triggered Brexit contingency plans for a no-deal scenario by the end of this year. This is not necessarily because they foresee a worst-case scenario outcome from EU/UK negotiations, but because businesses of this size and scale cannot afford to wait for clarity on the final shape of the UK's post-EU status.’
David Greene, senior partner at Edwin Coe, said: ‘For some time businesses that are likely to be affected by Brexit, including law firms, have been planning for the worst case scenario.
‘Absent any indication of what the final deal will look like, particularly in relation to services, including finance and law, businesses must prepare for what might be called a hard Brexit, which means falling back on the WTO terms. Many law firms, for instance, are setting up in Dublin to deal with European law particularly in competition and intellectual property. Further where our clients go we must follow. At last we now have the draft transition agreement of which a large part is agreed. This will give us all another 21 months but that is a very short period to sign up to a comprehensive agreement and even then the political uncertainty of what will happen in Parliament makes all of this difficult to predict. So the message is “Prepare for the worst and hope for the best”.’
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