That was the prevailing concern at a recent Brexit Brunch hosted by law firm BLM in partnership with Management Today, featuring a keynote presentation from former Conservative culture communications and creative industries minister Ed Vaizey, as well as expert input from the BLM team and a range of other advisors.
As Alistair Kinley, director of policy and government affairs at BLM, noted in his introduction, with the transition period still due to close on Dec 31st the hard yards are yet to come. ‘What we have done so far are the easy first steps. Moving the whole economy for completion by the end of the year is a big ask’.
But, he added, the government’s determination to avoid any further delays - and its clear mandate – should help it rise to the challenge. ‘We have an energised government with a "stonking" majority. As David Frost, the chief Brexit negotiator, has said, we should take inspiration from the fact that the original 1957 Treaty of Rome was negotiated and signed in under nine months. Surely we can do as well, with all the advantages we have now?’
Keep your business Brexit-fit with these four key insights from the debate:
1. Uncertainty is here to stay
Businesses have had to get used to plenty of uncertainty over the last three years. That, our panel agreed, will remain the case until well after the end of the Brexit transition agreement, scheduled for Dec 31st. As Ed Vaizey pointed out, no minister is permitted to ask for a delay. ‘But saying “We won’t delay” doesn’t mean there won’t be a fudge. Boris Johnson leads the strongest government in Europe and Brexit can be whatever you want it to be when you have such a large majority.’
From a legal perspective, the end of the current one size fits all legislation covering trade in the EU will mean that ensuring UK law applies to commercial contracts will become more important, said Greg Walsh, commercial and regulatory barrister at BLM. ‘Contracts will get more complicated for a time, because there are many more variables to keep under control’. The inclusion of force majeure clauses pertaining to Brexit could also be a sensible precaution, he noted. ‘If Brexit unexpectedly holds up your business you don’t want to be sued by a customer waiting for you to deliver.’
2. Immigration is about more than economics
For many businesses the number-one Brexit issue is the supply of employees from the EU. Further restrictions on immigration from the EU are likely to impact lower paid and casual workers disproportionately, while employing UK staff instead could be expensive and result in increased costs being passed on to customers.
But despite the problems it may cause business, don’t expect the government to back down on this touchstone issue for leave voters, counsels Vaizey. ‘Immigration is not an objective debate, it’s about people’s identity, a philosophical distinction between leavers and remainers. The government will maintain a tough line.’
3. Insolvency may spike
With the rates of corporate failure already at a seven year high, and one recent business confidence survey claiming that some 500,000 UK businesses are suffering ‘severe financial stress’, Brexit could lead to a rise in insolvencies. That was the view of Stephen Cork, managing partner of corporate advisory specialist Cork Gully. The major concern, he said, is over stockpiling – to cover the risk of disruption, businesses with suppliers in the EU either tie up vital working capital by acquiring enough stock to keep them going for a month or two over the vital period, or they risk being unable to fulfil customers orders. It’s an invidious choice for any management team, but SMEs are especially vulnerable he says. ‘If you are a smaller business reliant on bank financing, the impact of holding more stock on cashflow can be considerable. How will the banks look at that?’
The good news, he added, is that after a couple of tough years things should improve. ‘We see resilience, that the UK will step up and that the economy will grow thereafter.’
4. It could all be worth it in the end
Experts are wont to be cautious of course. Many of the business leaders present saw Brexit as more opportunity than threat. ‘I don’t share many of the concerns that have been expressed in the room’ said Andrew Langley, MD and founder of leather goods and stationery business Juniper Products. ‘We’ve doubled our UK production and our UK skills and training. Our clients – big brands - want to know what a product is made of and where it has come from.’
He was similarly bullish that fears over a Brexit-fuelled ‘race to the bottom’ in terms of UK wages, employment conditions and product standards won’t happen. ‘The opposite is true in my experience. UK businesses are in a good position and are actually leading the EU, because we are being held to higher standards which are coming from the client, they are not based on regulations.’
Where the government could do more to help SMEs, concluded Langley, is for those firms wanting to invest in productivity-boosting machinery and automation. ‘The challenge is around the lack of support for capital investment. There is no joined up thinking around improvements in productivity - I want to produce more with less but government support is all based around how many jobs will be created.’
The debate closed in reasonably optimistic vein. Cork noted that the anticipated rise in insolvencies should be ‘modest’ and that potential US ‘Chapter 11’ style reforms to insolvency law could have a positive impact on successful business restructuring.
BLM’s Kinley predicted that the late summer would see ‘an increase in ligitation in cases with a European connection' as companies seek clarity from the courts before the end of the implementation period. He also wondered whether the December deadline would ultimately give. ‘It remains to be seen whether the implementation period will end on Dec 31st or whether there is some form of fudged extension.’
Vaizey concluded, ‘I’m encouraged by the positive attitude around the table. The government will also see Brexit as an opportunity to flag up the reasons that investors come to the UK – beneath the fudge positive steps will be taken.’
For more information on Brexit’s potential impact on insolvencies, BLM's commercial litigation partner, Stuart Evans has put together this handy article.