Industry must forget the politics around Brexit and prepare now for the worst-case scenario

Written by: Tom Austin-Morgan | Published:

“One problem you have right now is that you can’t predict the future any better than I can, but what you can do is prepare for it.”

This was the advice being given to UK industry by Nicole Boehler, partner at international law firm Squire Patton Boggs, at the Motorsport Industry Association’s Business Growth Conference in July.

Boehler encourages industry to engage with customers, suppliers and advisors to learn about business opportunities and plan to avoid the potential barriers.

“We all expect tariffs of some sort to come out of this,” Boehler continues. “It’s not going to be a magic solution where Britain gets everything it wants and the EU says ‘Oh, yes please!’ I don’t think that’s gonna happen.”

In fact, the previous day, Ralf Speth, CEO of Jaguar Land Rover, spelt out his feelings on the possibility of a ‘hard Brexit’ – one where the UK leaves the EU and the single market entirely and has a relationship with the continent based on World Trade Organization rules. In a statement, Speth said that JLR would have to close plants in the UK (removing £80 billion of investment over the next five years) if a hard Brexit was actioned, as trade tariffs of £1.2bn per year would make it unprofitable for the company to remain in the UK.

This is because around 25% of JLR’s vehicles are exported to continental Europe, each of which will be slapped with an extra 10% tax to cross the border. In addition to this, 40% of JLR’s imports come from Europe and it is expected that, because of these tariffs, suppliers will have to raise their prices too.

Boehler is sceptical, however. “I think we all know that that’s not going to happen,” states Boehler. “Perhaps he’s just rattling the cage to get the attention of the lawmakers, who are set to meet this weekend [7th-8th July]?

“Interestingly for me, he indicated that he knew of no one who was looking for a hard Brexit and I thought that was unfortunate because all intents and purposes show that we are looking at a hard Brexit,” she adds.

However, Boehler says that the government is doing what it must do by making strides towards a final decision and is coming up with solutions. For example, on the right to remain in the UK for EU citizens.

“There is a solution in place and it does look fair,” she says. “But those are the steps that the government can take because it’s their job to regulate who can come in, who can leave and who can stay. But it’s our job as industry to do what we can do too.”

Boehler goes on to say that the best plan is to prepare for a hard Brexit scenario and importantly not to see Brexit as a barrier to growth but an opportunity for growth.

“Reorganise, refocus. Take this rare opportunity where not only can you invest in your structures, but you must invest in your structures,” Boehler urges. “A lot of this is homework. You don’t need a bunch of outside advisors. What you need to do is take a look at your in-bound and out-bound supply chain and the cost that’s associated with them and optimise and leverage your global footprint.”

She continued by saying that British industry is in a unique position, in that it performs on a global stage (especially in automotive and aerospace), but that most of the economic activity happens locally. Proper planning and focusing on the product will help avoid poor performance.

“We’re not a bunch or hand-wringers,” Boehler says. “What I want you to do is think about what you can do to increase predictability and reduce risk by doing so. What happens if we have a belly-flop next Summer? I can’t tell you. That’s something you need to go home and do some homework on. Don’t forget the small, boring stuff, I mean, that’s generally what the lawyers are for but you’ve got to plan for it.”

Boehler says British companies need to: undertake a Brexit statement & risk report as well as a trade impact assessment; obtain systems advice and advice on immigration (although, this has already been simplified with the right to remain decision where the government’s ‘default’ position would be to grant rather than refuse settled status); look at issues around VAT; supply chain, contract renegotiation and new contracts; IP assessments (are your property rights going to carry over? Where will you have to register as a British company going forward?); and get advice about trading in new markets and countries outside the EU.

To help with all this, Squire Patton Boggs has drawn up a preparedness questionnaire and sends out regular updates to keep companies informed.

Since the MIA Business Growth Forum (and at the time of going to press), the Prime Minister has unveiled a whitepaper that sounds, on the face of it at least, to present a ‘soft’ Brexit for trade, with plans for frictionless trade at the border. However, this has already seen revisions in Parliament and, as with most things Brexit, whether these plans will be accepted by the EU, remains to be seen.

So, has Boehler’s message changed at all in the wake of these developments? No, she says being prepared for the worst scenario is still the best approach: “No matter what comes of the negotiation, be it smooth sailing or horrendous fall, I believe British industry is uniquely positioned to master this challenge.”


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