Despite the Prime Minister’s previous assurance that he had an oven-ready trade deal with the EU, he is now warning of an Australian-style deal. This is a political euphemism for no deal. So, the UK would leave the largest global free trade area to move to WTO terms with the EU. Of course, this PM is no stranger to posture-politics and this could simply be part of his inimitable bluff and bluster style of negotiations. In which case, this post will be irrelevant in a couple of weeks. But both the UK and EU are now preparing for no deal. So should you. If you follow this blog, you will likely have taken steps already to prepare. If not, read on…

Price hikes

Some analysts suggest the pound could drop by more than 20% in value. Also, without a trade deal, this could lead to the imposition of UK tariffs on your imports. Similarly, the EU27 will likely slap tariffs on your exports too. This double-whammy will see prices jump for crucial hardware you buy including PCs, mobile phones, servers, cloud services etc. Check your contracts. Consider whether you have the right to renegotiate the price or, in the worst case, end the contract. Would switching to a different currency help?

Delays in supply

Not only will hardware become more expensive, but new quotas and customs checks could delay supplies from the EU27. Don’t forget the UK will lose the benefit of all trade deals it participates in through membership of the EU. Except for the handful of separate deals the government has negotiated, of course. Consider buying in advance of 31 December or switching suppliers.

Staffing

Recruiting staff from the EU will become more difficult. You’ll have to sponsor them just like for other foreign nationals. Also, any existing EU staff will have to leave the UK unless they apply for settled status. 2020 has seen a societal shift to remote working. Maybe your new staff need not be physically-based in the UK?

Local office

Currency fluctuations, tariffs, quotas. It makes the UK a much less attractive place for international businesses. Some businesses are already moving their offices to Dublin, Frankfurt and Amsterdam. You should consider opening a local EU27 office too for non-UK business. From a practical point of view, remember that “EU” in your contract will be one less country in 2021.

Choice of law

English law is respected internationally. That might change as the UK becomes isolated. Expect push back in your contracts for French or German law. But remember, there is no such thing as EU contract law – yet.

Choice of courts

Judgments of English courts should continue to be enforceable in the EU27. Keep an eye on this. Also, consider if arbitration could be a better option.

GDPR

Without a trade deal, the UK will become a “third country” even though the UK will continue to abide by GDPR. This could hamper transfers of data from the EU27 to the UK. Until the EU Commission issues an “adequacy decision” you should use the EU model clauses in your agreements. Beware, the EU Commission will change these in the coming months.

Exit the contract

Lockdowns and social distancing have already disrupted contracts in 2020. But Covid-19 wasn’t foreseeable. A no deal Brexit is predictable so this is unlikely to be a “force majeure” event outside your control. But if your contract becomes impossible to perform then maybe you can terminate it.

If you need advice, contact me f.jennings@teacherstern.com or +44 (0) 20 7611 2338.