The Business Exchange Swindon & Wiltshire Edition 40: Dec/Jan 2018/19 | Page 43

IS IT ME? IS IT ME? John Davies is a senior corporate partner at leading commercial law firm Thrings. In each edition of TBE John addresses a topical news or business-related issue. This time he talks about “the squeezed middle”... Thrings @ThringsLaw www.thrings.com OK, so I had a little rant about Halloween in my previous column, and do you know what? I feel a whole lot better for it. Next on the agenda is Christmas. I’m afraid I can’t be a misery about the festive season because I love it - it’s probably my favourite time of the year. So before I get into what I really want to talk about I’d like to take this opportunity to wish you all a wonderful Christmas. Now for something completely different. When we listen to the radio or watch the news, we often hear about the ‘squeezed middle’. I guess it’s a reference to the section of society which is neither very wealthy nor very poor, those who appear to suffer when taxes are raised, pensions are tweaked and house prices or mortgage rates go in either direction. Well this month I’m thinking about one of the unforeseen consequences of the Brexit negotiations and its effect on the squeezed commercial middle. Over the last few weeks and months I’ve been hearing from clients and contacts who have been placed in situations which have largely gone unreported by the media and ignored by the personalities on both sides of the Brexit divide. I’m writing this article on the morning of Wednesday 14 November, the day on which Mrs May is due to take her ‘deal’ to the Cabinet. We have no idea what the outcome will be or whether the deal, as it is, will get through parliament. It’s been a recurring theme over the last two years – a lack of certainty and a lot of conjecture. Brexit, however, has caused certain commercial realities which have become fixed. Businesses have been forced to jump out of the plane without knowing the co- ordinates for landing. Offshore subsidiaries have been created. Offices and factories have been moved to mainland Europe. European staff have left the UK. Businesses have stockpiled products - all actions and reactions which have been driven by a theatre of fog and mystery. And in all of this fluidity we find the squeezed commercial middle. I’m thinking specifically of those mid-tier companies which are big enough to be affected by corporate plate tectonics but not big enough to have a voice or an impact. I’ve heard stories of tier one and two suppliers having to invest in plant and machinery to win a potential contract, only to be told the global player won’t sign the contract until the uncertainty of Brexit becomes clear. It’s the squeezed middle who are being asked to take the risk in the contractual chain. I’ve listened to business leaders in the food industry concerned about supplies, in some cases forced to stockpile for fear of running out of raw materials. This has a double impact: the cost of storage and the negative push on cash flow. Again it’s the squeezed middle taking the brunt. The issue is that the biggest fish are able to dictate terms and offload risk, because if the tier twos don’t forward purchase the machinery or stockpile the raw materials, they won’t win the contract. It’s a tough one. I rarely, if ever, use this column to talk about legal issues but the one thing you can do if you’re in the squeezed middle is check your contracts. Identify where the risk sits. Who pays for change? Are you able to exit a non-profitable situation? It’s hard to plan when you don’t know what the end game is – but you can take steps to ensure you’re entering commercial situations with your eyes wide open. My final comment goes out to those people in my network who enjoy pulling my tail. The squeezed middle does not refer to my suit trousers! John Davies e: [email protected] t: 01793 412634 Where every event is a landmark occasion 01225 477786 bathvenues.co.uk THE BUSINESS EXCHANGE 2018 43