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Exporting in the Brexit Climate

Gregg Latchams’ Manufacturing and Supply Chain sector recently considered this topic in their ongoing series of lunchtime directors’ forums for SME business owners. Here, Paul Hardman, Head of the Manufacturing and Supply Chain sector, considers some of the key points that emerged from the discussion.  Those present are currently exporting or about to sign contracts in Brazil, China, Spain, Croatia and the Middle East and Asia.

When it comes to the story of exporting no two companies are alike

Everyone has a different story when it comes to exporting. Around the table, the reasons included: a reaction to a shrinking home market, a deliberate strategy of engagement in a global market, a desire to set up an overseas base to source cheaper parts, and a necessary corollary of response to a tender. 

The Significance of China

Gregg Latchams has its own story based around an interest in understanding the opportunities in China which has brought export success in the form of acting for overseas clients looking to come into the UK. The firm’s interest has been a focal point for China related activity and around the table we had a company exporting to Chinese aerospace, manufacturing car parts, a company advising on UK companies looking to source in China and the Department of International Trade’s specialist China adviser. China may emerge as a key business partner to the UK after Brexit but there is still a lot of work to be done to help businesses engage with Chinese investors and markets and to create greater understanding of each others’ expectations.

Will the EU and UK go their own way?

The Chartered Institute of Procurement and Supply recently reported that nearly two-thirds of EU businesses expect to move their supply chain out of the UK; two-fifths of UK businesses are looking to replace their EU suppliers; and 25% of large UK businesses (over 250 employees) have spent £100,000 preparing their supply chains for Brexit.

The impact is being felt in fewer orders in a logistics business in the haulage industry where drivers are returning to their EU home countries because of concerns about being in the UK after Brexit. But for an aerospace logistics business the problem was increased demand requiring them to source from the EU to satisfy their raw material requirements.

Nick Jones, Head of Employment at Corporate Support comments: As the effects of Brexit are being felt within the labour market, business must consider alternative routes to securing required labour. Where skilled labour cannot be sourced in the UK, employers will need to make greater use of the Points Based Immigration System, requiring specialists to guide their successful applications.

Oil and Gas sectors

For two businesses working in oil and gas, the market was recovering but both agreed that in terms of margins and spend, it would not be to pre-oil price crash levels.   This is in part because a large part of the supply chain had been decimated by the crash and in part due to the challenge from renewables.  Both businesses were looking to diversify whilst maintaining a significant presence in the oil and gas sector:  one was already developing a market in renewables.

Law and Exporting

For those exporting, a good law firm in the destination country was necessary: for advice on trading terms, agency and distribution agreements and setting up of local subsidiaries. Looking at intellectual property, a more global approach was required and that, perhaps paradoxically, meant a single source to project manage and ensure consistency across all markets.  Brexit might mean a dual approach to the UK and the EU with the opportunity (and associated cost) of exploiting each separately. 

Companies were encouraged to consider the benefits of a well worded arbitration clause bringing with it the benefits of direct enforceability in signatory countries.[1]

Chris Haywood Head of IP & Media comments: the implications of Brexit on IP will be wired-ranging and complicated. A truly global market is a great opportunity, but putting in place a global branding and IP strategy early on is absolutely critical if your business is to flourish overseas. It is well worth taking the time to discuss your plans with an experienced IP lawyer to ensure that expansion is smooth and achieves the maximum possible return on investment.

Brexit brings…uncertainty

Despite a plethora of advice, there was unanimous agreement that Brexit can be summed up in one word, “uncertainty”. It was, however, accepted that the amount we will know about what is really going on is necessarily limited and, as with all tight negotiations, the final deal is not likely to emerge until the eleventh hour.

Looking for silver linings, despite misgivings that Brexit would bring a slow down gernerally, the mergers and acquisitions market remains busy. Businesses still need to grow and show returns and there are plenty of equity funds in the system which need to find a home.

Paul Hardman, Head of Corporate and Commercial and a Director of GL Business Consultancy comments: As a nation we are fortunate to have London as a global finance centre giving business owners access to funds to help make their post Brexit survival strategies a reality.

Conclusions

There is a lot of hope, particular from the Government, that Britain will achieve export led manufacturing growth. Business is doing its thing, which it always does, getting on with the next project, winning the next order, making sure that it can deliver.  There was little evidence today that the Government was shaping business’s thinking other than as a response to the uncertainty created by Brexit.

 Kieren Windsor, Head of GL’s In-house lawyer service comments: In an uncertain environment, businesses will continue to develop, grow and seek new markets. GL can support businesses in achieving this. We recognise that a suitable legal structure must be a part of the solution, enhanced by innovative and bespoke ways of gaining access to legal support, such as IHL and further by offering other services such as Business Consultancy, to ensure that a successful future is built on a realistic and deliverable plan.

 

[1] See further the separate article on arbitration by Ken McEwan

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

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