Commercial property and Brexit: key considerations for UK businesses with offices and infrastructure in the EU As we prepare to say bon voyage, ciao and adios to the EU, newspaper columns have been choked with stories about UK businesses relocating to one of the remaining 27 member states – or even further afield. Such is the concern surrounding the UK’s departure from the EU, these organisations are prepared to execute drastic contingency plans in a bid to minimise the impact of Brexit – especially in the event of a no-deal. According to the Institute of Directors (IoD), almost one in three British businesses are planning to relocate part of their operations overseas or have already done so to mitigate the effects of a hard Brexit – from increased trade barriers to complications in the movement of people. Those firms considering a move are typically looking to open offices inside the EU, said the IoD. Once there, they will be joining the many UK businesses with existing operations in the EU that were established long before the term Brexit had even been coined – are these trailblazers better placed than any to cope? One thing this army of EU-based UK businesses, and those aspiring to follow in their footsteps, have in common is they possess, or will require, commercial property in the EU. With Brexit on the horizon – or at least expected to appear there eventually – businesses in possession of, or seeking, commercial property in the EU must consider its impact carefully. So, how might Brexit affect the commercial property landscape in the EU for UK businesses like yours? Commercial contracts The UK’s withdrawal from the EU is predicted to have a huge impact on commercial contracts between UK and EU businesses – including commercial property leases. So, now’s the time to Brexit-proof your contracts. Brexit is likely to affect commercial contracts in several ways: Performance – this concerns your business’s ability to perform under the contract, or the potential for performance to become less desirable. For example, currency fluctuation could have a major impact on the performance of contracts between parties in the UK and EU, rendering them commercially unviable. So, don’t rely on existing contractual provisions to resolve issues that may arise in the performance of a contract following a Brexit related event, as they are unlikely to work. And consider if a Brexit clause, which activates vital rights and obligations in the event of specified events, should be included in existing and new contracts. Interpretation of contractual terms – contractual interpretation will shift once Britain leaves the EU. For example, any reference to the ‘territory of the European Union’, or the application of a specific term of EU law which has been replaced by UK legislation, may create disputes. So, review, and where possible, amend the terms of existing contracts where necessary and ensure all future contracts are carefully drafted to avoid potential disputes. Rental prices UK businesses that choose to up sticks and move to the EU to beat Brexit will have to think carefully when deciding where to relocate their operations. Countries like Ireland, France, Germany, Belgium, Luxembourg and The Netherlands are proving popular destinations so far – thanks in large to their proximity to the UK and economic stability. For example, The Dutch government is in talks with 325 British-based companies that are considering relocating after Brexit, as anxiety around the prospect of a no-deal grows. A major consideration when deciding where to relocate will be the rental price of commercial property. Thankfully, these UK businesses can rest assured they will avoid paying the most expensive prime office – properties located in major commercial centres, with good public transport accessibility and energy efficiency – rents in Europe, because that title goes to London. So, how does the average prime office rental cost in London’s West End (€1,312) compare to other major European cities? City Rental price per square meter per year of prime office spaces (as of the first quarter 2019) Paris €845 Zurich €738 Moscow €703 Dublin €673 Geneva €626 Milan €580 Frankfurt €522 Amsterdam €475 Munich €438 Berlin €432 Madrid €366 Brussels €320 Vienna €312 Budapest €294 Warsaw €288 Prague €270 Barcelona €270 Bucharest €216 Currency The cost of owning or renting commercial property is considerable – from deposits and monthly rent or mortgage payments to repairs, maintenance and services. UK businesses with operations overseas have an added element of risk to contend with that has the potential to increase these costs: currency. Exposure to fluctuations in the rate of exchange is a major consideration at the best of times for businesses with international payment requirements. Since June 2016, however, when the UK voted to leave the EU, the prospect of Brexit has heightened this concern. The ensuing political and economic uncertainty has caused the pound to plummet in value against the euro, driving up the cost of sending money to the EU. For example, in August 2019 the GBP/EUR rate fell to €1.07 – its lowest level in 10 years. Thankfully, you can help reduce the risk of these market movements increasing your business’s commercial property costs by speaking to the RationalFX team. With an experienced account manager to guide you, we’ll take great care in assessing your business’s requirements and support your currency strategy designed to help you achieve your goals. From simple international trade-related payments to your sophisticated commercial strategies, our team’s knowledge and guidance are an invaluable resource. If you’d like more information about the services RationalFX provide or further details about how we can help manage your FX risk during and post-Brexit, get in contact with our team: Email: [email protected] Call: 020 7220 8181 or sign up to create an account with us.