BREXIT: Businesses need to plan now for day after EU referendum says former Europe minister

This is part of Out-Law's series of news and insights from Pinsent Masons lawyers and other experts on the impact of the UK's EU referendum. Sign up to receive our Brexit updates by email.

Douglas Alexander, an advisor to Pinsent Masons, the law firm behind Out-Law.com, said that it is vital that companies begin planning now for the impact it would have on their business if the UK voted to leave the EU in the referendum on 23 June.

"It is best to make high pressure judgements in low pressure situations," he said. "If as a business you think there is a possibility that Brexit could happen then it is a responsible and wise course to do some serious planning at this juncture so you are not looking at a blank piece of paper on 24 June."

Alexander said that the social, political and economic consequences of the UK leaving the EU could be enormous.

"It could set in train a contagion of disintegration and distract Europe's attention at a point where it faces simultaneous challenges: economic challenges; a humanitarian crisis on its southern shore; the security challenges visible in the Paris attacks last year and the security threats from Russian and the Ukraine and from Syria," said Alexander.

"For the UK the first serious consequence of a vote to leave would be serious political instability," he said. "My sense is that we would see the almost immediate departure of the present prime minister and the formation of a new government. There would be a resurgence of constitutional instability –a vote to leave would be a shock for voters in Scotland just two years after a vote to stay in the UK. There would be deep uncertainty about the character of Britain's relationship with continental Europe."

Alexander said that in this context it is vital that companies act now to assess the impact that these possible changes would have on their business.

Practical steps that companies should take now include having discussions involving legal advisers, risk committees and boards about the potential impact of the referendum result, he said.

"Translate those discussions into practical contingency plans," said Alexander. "While the British government will not be publishing contingency plans it would be sensible for British businesses to have done the work in advance to consider the possible impact on their own business of the referendum result on June 24th."

Alexander was addressing a Pinsent Masons event analysing the impact of the referendum on business. He was joined by European economy expert and associate editor of the Financial Times Woflgang Münchau, who said there was some immediate practical action that companies could take to deal with the effect that an exit from the EU would have on companies' currency and shares exposures, and on their ability to raise funding.

"You should hedge your risk, take it that there will be a 20-30% fall in sterling and the stock market," he said. "Make sure you are capitalised beforehand. And in time start rethinking your business model, though that is not something to do immediately. Nothing will happen to trade, so you don't have to put your goods across the border. It's about hedging financial risk and having a plan in place soon afterwards about what to do with your business."

Alexander said that companies should be aware of the wider social and political context of the vote, since the economic impact of an exit would be heavily coloured by the political fallout.

"If Britain voted for exit there would undoubtedly be a view in Europe that Britain still wanted all the privileges of access to the EU market without all the responsibilities of EU membership," he said. "We shouldn't be naive, there is politics on this on both sides of the channel. My sense is that other EU member states would feel obliged to exact a price from the UK in order to try to avoid the risk of the contagion spreading.

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