No-deal Brexit: a checklist of what consultancies, staffing and recruitment companies may need to think about

Written on 20 Aug 2019

As 31 October looms closer and rhetoric from both the UK and the EU27 hardens, the increasing possibility/probability of a no deal Brexit is causing a number of businesses to step up their preparations for that eventuality. Below is a checklist of some of the key issues to consider if/when the UK becomes a third country, particularly in the event of a no deal Brexit.

  • Data protection is an area of major focus:

    • The free flow and processing of personal data as between UK and the rest of the EU could be impacted by a no-deal Brexit. Helpfully, the UK has said that transfers of personal data from the UK to the EU will not be restricted immediately post-Brexit. However, EU ‘model clauses’ may be needed for personal data flows from the EU into your British business and (once here) for flow of that data from you to counterparties/subcontractors in the UK (the second bit of which is often overlooked), until such time that the UK data protection measures are granted “adequacy” by the European Commission.
    • Will you need to consider whether to go for a lead supervisory authority other than the UK and will client contracts need to be amended by addendum to allow transfers of personal data out of the EEA (the UK will no longer be in the EEA).
    • If you are relying on model clauses, be aware that the European Court of Justice is expected to deliver a ruling in early 2020 in a challenge brought by data privacy campaigner Max Schrems.
    • Whilst the UK has said that transfers of personal data from the UK to the EU will not be restricted immediately post-Brexit, it is also possible that UK laws relating to personal data transfers could change post-Brexit, meaning that organisational and contractual arrangements around personal data transfers will need to be kept under review.
  • Do British parts of your business currently rely on freedom of establishment rules in relation to the rest of the EU, including freedom of your UK contractors to drop in and work for your clients overseas on a freelance or statement of work basis?

  • Do British parts of your business rely on any current (EU membership-related) relaxation of licensing etc. requirements for UK-based staffing and recruitment companies? Will the “good parts” of the Agency Workers Directive cease to apply in relation to the UK, allowing EU Member States to protect their local markets from competition from UK staffing companies?

  • Is there any practice of British parts of your business moving staff and/or contingent workers between the UK and rest of the EU and vice versa? If so, depending on the detail and timing of post-Brexit immigration and visa rules in the UK and the EU27, a no deal Brexit may mean your key people cannot easily be where they need to be for you to service clients. If this means that (for example) you cannot meet fill rate KPIs, will they need to be amended?

  • Immigration (about which we have been doing a lot of work): obviously future access of UK businesses to EU labour is a big issue for many staffing and recruitment companies.

  • How would your contract terms be affected by a no deal Brexit?

    • Does the British part of your business have contracts which refer to the EU – and if so, do they need to be amended? For example, do they refer to licences to use software in the EU. Do contracts refer to EU for geographical application or to specific EU laws?
    • Should you clarify that Brexit is not a force majeure event, or an event that gives rise to frustration, or contractual rights of termination etc?
    • Will you need to check your currency fluctuation risk and agree clauses with contracts to ensure you can pass on increased costs? How would your contract terms be affected by a no deal Brexit?
  • Would a no deal Brexit have tax consequences, for example in relation to intra group dividends, or on the practicalities and cashflows in relation to the payment of VAT?

  • Have you considered your Intellectual Property Rights? Will you need to take action to protect trademarks across both the UK and EU? Existing community trademarks will continue to be valid in the EU and will be granted equivalent rights in the UK, but the situation is more complex when it comes to pending marks, challenges and renewals of rights.

  • The application of the Payment Services Directive issues may cause issues for Managed Service Providers and others who act as payment agents across multiple jurisdictions within the EU. Will compliance with the UK regime be sufficient, in future, for payment services across the EU?

  • Public procurement: if any British part of your business supplies from the UK into the public sector in the rest of the EU, will it be able to continue bidding for contracts following a no-deal Brexit? [The UK intends to accede to the UN’s Government Procurement Agreement, which would preserve broad rights of access, but to date this has not been finalised, and would also represent a more limited regime than the current EU regime.] Conversely, might there be opportunities if EU bidders are prevented from bidding for certain public contracts in the UK?

While some important issues remain uncertain, there is a lot that businesses can be doing now to ensure they understand and are prepared for the risks (and opportunities) that a no deal Brexit would bring. Let us know if you’d like specific advice on any of the areas discussed above, or any other aspects of Brexit.