Andrew Northage and James Crayton at law firm Walker Morris, share legal lessons and advice for businesses operating in the UK and US, including the regulatory hurdles when expanding into or out of the UK
Disruption and change is nothing new, yet the last few years have thrown up some particularly awkward curve balls for manufacturing businesses around the globe.
While the most obvious challenge is the ongoing disruption related to the Covid-19 pandemic, in the last 18 months businesses have also been forced to deal with huge upheaval in the wake of Brexit, political uncertainty in the US and challenges surrounding geopolitical issues with China. On top of this, we are increasingly affected by skills shortages, driver shortages and the resulting impact this is having on supply chains.
In many cases, the pandemic has also exacerbated already-present issues. The manufacturing industry’s exposure to commodity markets and ‘just-in-time’ procurement means that businesses are vulnerable to economic shocks and supply chain interruptions immediately, both of which are happening with greater frequency. International trade disputes, along with enhanced pressure to become more environmentally sustainable, are similarly increasing.
Disruption on the rise
As the world continues to open back up and return to more normal operations, it is vital that businesses in the UK and US are prepared and are able to take advantage of the shared opportunities – and overcome the challenges – presented by bilateral trade.
As traditional industrial areas, the US Midwest and the UK’s Northern Powerhouse have long had much in common, with factories that power each respective territory’s economy, employment and exports. Today, they are hotbeds for the industries of tomorrow, including renewable energy, electric vehicles, bioscience, nanotechnology and advanced manufacturing, despite facing significant challenges posed by the pandemic.
From experience working with clients in both regions, we know that American and British manufacturers are tackling a common set of commercial challenges in the face of global transformation, and the sector has encountered a wide range of obstacles for decades.
Despite these challenges, a recent in-depth study of 200 manufacturers carried out by Walker Morris highlighted the optimism and ambition that is felt across the sector. In the published report, the research revealed that one in three (34%) are targeting a merger or acquisition to drive growth and more than half (52%) are pursuing international expansion.
Regulation is a common barrier for businesses wanting to trade overseas, and changes in regulation can create large hurdles for both US and UK businesses chasing international expansion.
Our report showed that almost nine in ten (87%) businesses are experiencing challenges in working with foreign legal systems and a further 80% are hindered by barriers to trade such as tariffs and quotas. With red tape being highlighted as the biggest hurdle for businesses when trading internationally, it was also revealed that more than half (53%) of businesses think that the volume of regulation in their target market is an issue.
There are many factors at play here, from more rigorous environmental standards and data protection rules in response to societal changes, to the re-emergence of protectionism and embargoes as a result of political instability. The exact nature of the challenge will inevitably vary according to the market and business in question.
The regulatory challenges vary from sector to sector and from company to company and so are necessarily wide-ranging. But one recurring question we help to answer is – how can I do this?
Identifying the key issues
The regulatory landscape can appear daunting and the answer, in nearly every case, is to start working through it as early as possible. By doing this, it enables any key legal, regulatory and compliance issues to be identified and dealt with at each stage of the supply chain – whether that be for the manufacturer, distributor, retailer or an authorised representative.
While these issues cannot necessarily be fixed overnight, it is important to spot any issues as and when they occur, to prevent additional difficulties further down the supply chain. It’s important that businesses allow sufficient time to deal with and overcome regulatory hurdles, in order to put the right contractual and other protections in place.
Digital tools can help to automate many administrative processes, such as those associated with finance or human resources but regulatory compliance represents a far greater complexity. It requires in-depth knowledge of the regulation in question and the markets or scenarios it applies to.
Regulation is undeniably complicated but it’s important to remember that most of it is there for a reason. It’s also unavoidable for any business wanting to move goods around the world. While it can be time consuming, it’s a surmountable hurdle – by understanding the detail and creative commercial solutions, there is usually a way through it and this is enhanced if you work with advisers who know your sector and market.
There are myriad opportunities in increased bilateral trade and companies are clearly aware of them. But when embarking on this kind of work, it’s important to manage the specific challenges that trading across the Atlantic can bring. Starting early and working carefully through your unique situation and objectives will enable you to find creative solutions and benefit from a much larger, global market.
Andrew Northage is Partner and head of International Trade, and James Crayton is Partner and head of Commercial at leading law firm Walker Morris. To register for Walker Morris’s upcoming webinar on ‘How do you make a resilient supply chain?’ on the 16 November, please head to: https://www.walkermorris.co.uk/events/webinar-how-do-you-make-a-resilient-supply-chain
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