The strong headwinds currently facing the UK economy are being felt by us all. With double digit inflation forecast to continue into 2023, we will all be feeling a squeeze on our living standards. Further pressure on household budgets is also now being seen in higher mortgage and rental costs. This tightening of belts has already had significant impacts on consumer confidence which in turn is playing out in the real economy in the form of reduced consumer spending.
Many consumer-facing businesses may have already been feeling the pinch following the pandemic but they will now be directly experiencing the latest economic shocks. However, there are knock-on effects for all sectors of the economy. In short, the UK, like many European countries, seems to be heading into a recession or, at the very least, a period of sustained economic instability. On top of this, the cost of living crisis has prompted workers across a range of sectors into strike action, threatening further business interruption.
Unstable economic conditions change the character of legal work for in-house lawyers. Even those businesses seemingly most insulated from the effects of the current economic instability are likely to face pressures from a range of sources in their supply chain.
In light of the current challenges, Practical Law has recently updated two key resources designed to help in-house lawyers:
- How should lawyers prepare for a recession?, a practice note setting out the measures that can be taken to ensure businesses and legal teams are resilient during a recession.
- Recession and economic instability toolkit, a detailed toolkit compiling all relevant materials from across Practical Law to enable in-house lawyers to meet the vast range of challenges they could face at these times.
In-house lawyers have a critical role to play at the moment and, taking the positive spin – as we should, have a perfect opportunity to demonstrate their leadership and value to the business. The toolkit should help equip in-house counsel with the wide range of tools they need to carry out this role. Lawyers are likely to need to be willing to get their hands dirty dealing with areas of law and procedure that may be unfamiliar, such as relating to restructuring and insolvency, and embrace complex new tasks. They will need to work more closely with a range of other stakeholders both inside the business, not least the board who may need additional help complying with their duties, and beyond.
Routine areas of in-house practice like managing commercial contracts will naturally come under the spotlight as customers fall behind on payment and suppliers fail to deliver essential goods or services. Pragmatic solutions to messy contractual problems will be needed in abundance. The toolkit gathers together the key resources to assist with this.
We are also likely to see an increase in the number of disputes far beyond simple debt collection, and rapid changes to the financial playing field will lead to a need for more refinancings and fundraisings. While there is likely to be a decrease in overall merger and acquisition activity, the sale of distressed businesses and non-core businesses may see an uptick, leading to acquisition opportunities for others. Redundancy is going to become a more prevalent feature of the employment landscape and many businesses will need strategies for effectively managing threatened or actual industrial action.
These are just some of the key themes the toolkit has been designed to address. The toolkit will help enable lawyers to be ready to deal with whatever is thrown their way during turbulent times, and show the leadership their businesses and colleagues will demand.
