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
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