Peter Snaith is a partner at Womble Bond Dickinson, manufacturing sector head and head of the firm’s Teesside practice. Here, he reflects on the impact of uncertain times for business.
The future of the economic and political landscape for the UK has rarely been more challenging than it is now, but we have resilient businesses in our region with strong leadership who have shown their ability to adapt to new challenges and to grasp fresh opportunities.
Many of our local companies have reinvented themselves before and they can do so again.
We can take comfort from the fact that Teesside is home to world-class manufacturers of products that underpin the supply chains of numerous global industries, many of which can offer sustainable solutions to the lifestyles we consumers expect.
Our region is a hotbed for digital tech innovation and we also boast the largest industrial development site in Europe at Teesworks that is attracting inward investment from across the world.
Throughout the Covid-19 pandemic, we have continued to enjoy local success stories but never before have crystal balls been in such demand.
What will the new normal look like for the rest of this year and will it change again after the Brexit transition period ends?
Will we experience a second wave of coronavirus infections and have we built in the resilience measures to enable business and our communities to plough on through?
Will traditionally strong customers and suppliers survive increasing cash flow challenges as support measures begin to be rationalised?
We should be optimistic about the fact that, in contrast with the economic crash of 2008, there is no shortage of liquidity in the market. Financial institutions and private equity houses have capital to invest in strong businesses which can help our region thrive again, but deal activity levels are modest at present and it is likely to be the new year before things pick up. However, nobody can afford to put business on hold as we wait to see how things develop.
After the financial crisis 12 years ago, businesses focused on their supply chains, moving away from ad-hoc purchase orders and onto longer term supply contracts to provide greater certainty of supply and predictability with respect to price.
Dealings with customers switched from spot orders and just-in-time deliveries to framework agreements under which greater resilience could be assured for customers in return for guaranteed sales.
Contracts are the lifeblood for businesses and there are real opportunities for differentiation within manufacturing and related sectors.
We are seeing the increasing trend of “manufacturing as service” or servitisation as manufacturers seek to maintain a relationship and revenue stream beyond the supply of product as well as manufacturers going direct to the end-user.
The new approach can deliver a greater share of wallet, longer-term contracts, better relationships with customers and steady cash flow forecasting, among other benefits.
Alongside such developments, recent events have triggered more evolution in longstanding English contract law principles than we have encountered for many years. Exporters must try to anticipate and manage the potential additional obligations attaching to goods and services leaving the UK as well as the possible delays and disruption to imports.
The impact of the pandemic has brought renewed focus to the principles of force majeure as customers and suppliers experience setbacks to their business which arguably may, or may not, be outside their reasonable control.
The new Corporate Governance and Insolvency Act, which came into force in June, has significantly impacted the well-established measures businesses can take to protect themselves opposite potentially insolvent customers and suppliers, at a time when more businesses than ever are facing financial difficulties.
Great change brings great opportunity for those who are both dynamic and prepared – and great threat for those who are not.
Having an experienced legal advisor to help you identify and resolve legal and commercial issues will be more essential than ever.
Womble Bond Dickinson’s dedicated national manufacturing sector team is one of the largest in the UK, with specialists with years of experience of supporting clients with regulatory challenges, compliance matters, day-to-day contracts and strategic projects.
To find out how Womble Bond Dickinson’s legal team can assist and grow with you on Teesside, please contact Peter on 0345 415 0000 or email firstname.lastname@example.org.