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Latest News Brexit

Brexit – The UK Government’s paper The Future Relationship between the United Kingdom and the European Union contains two central proposals for establishing a free trade area for goods but at the same time a new framework for control of movements of people.

These two issues represent some of the core reasons of the uncertainty about the future relationship between the European Union and the United Kingdom: whether or not there will be a hard customs barrier and what restrictions will there be on the movement of persons?

A recent survey of the reaction of UK Chief Financial Officers to Brexit (The Deloitte CFO Survey Q2 2018) shows that many companies will be adopting a defensive strategy, strengthening cash-flow and seeking cost-reductions. Many companies are planning to reduce their hiring plans and capital expenditure. However, those defensive strategies are less apparent in companies which are already internationally-focussed.

Companies deriving more than 70% of their revenue from outside the UK are inclined to have more expansionary strategies that can aim to expand into new markets, perhaps through acquisitions or increased capital expenditure.

Companies which currently have or intend to have relations into the UK or out of the UK into Europe are encouraged to put in place contingency plans and to examine how, for example, Brexit could have an impact on their business. That impact is not limited to trade and customs issues, but can impact contracts and intellectual property rights, data protection and transfers of data, rights of employment and the movement of people.

It is recommended that contracts should be reviewed in terms of their governing law and jurisdiction clauses in order to assess the impact of Brexit. It is a moot point whether courts in one of the remaining 27 member states will continue to recognise exclusive jurisdiction clauses in favour of a UK court, for example. It may be more difficult to enforce decisions delivered in France in the UK and vice-versa.

In terms of people, Brexit could require EU nationals to apply for permanent residence or citizenship in the UK and UK citizens to do the same in the EU. Employers may need to assist their employees in the process and plan for a situation in which freedom of movement is more constrained. Brexit will also likely have an impact on the ability to recruit UK nationals in the EU and EU nationals in the UK.