Manufacturing is undergoing a transformation. UK businesses are making the most of the opportunities presented by new technology. They’re investing in new equipment, upgrading existing plant and investing in new manufacturing facilities — creating ‘smart factories’. But to adapt successfully, it’s important to understand and manage the risks. Which is why legal expertise at every stage is a vital component in the process.

Go to stage 1: Initial concept 1

Initial concept

How do you develop your initial concepts and turn them into robust plans?

Go to stage 1: Initial concept 2

Making plans

With the initial concept in place, how do you execute more detailed plans?

Go to stage 1: Initial concept 3

Making the move

Construction is now complete. What do you need to think about next?

Go to stage 1: Initial concept 4

Troubleshooting

Issues can arise which may result in you taking or defending legal action.

Go to stage 1: Initial concept 5

Business as usual

Has the way you do business changed? What are the legal implications?

1

Initial concept

It’s time to start planning. Getting the right foundations in place will help you avoid complications later on. These are some of the areas you’ll need to think about. Of course, our expert team is always on hand with help and advice.

Business Case

What is driving the project? What are your aims?

Timing

What timescales are you working towards? What is the final date for completion?

Finance

How will the project be financed? What will it cost?

Location

Where will the new factory be located? What planning permissions are needed?

Equipment

Will you be developing your own equipment and machinery or purchasing it?

Regulation

What licences or permits are needed?

Technology

Are you planning to use and/or develop new smart technology?

Suppliers

What contractual relationships will you need in place to effect the construction and to supply services?

People

How will you staff any new facility? Will you need new recruits or will your existing workforce move/adapt?

Key risks

Some of the risks you’ll need to address now to keep your plans on track. We can help you here.

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Planning

Failure to get advice on the likelihood of planning permission being granted could mean your plans are not viable. Click for our checklist

Planning Checklist

Is new permission required or changes to existing permissions? Take advice early and factor in the time to arrange permissions to avoid delays. Is there an existing factory? Are there any restrictions on use or operations that may limit value? If the site is to be built from scratch, you will need to consider planning agreements, highways and development agreements.

Environmental

Failure to consider environmental (and health and safety) issues from the outset could mean that you miss the opportunity to amend plans to address such problems. Click for our checklist

Environmental Checklist

Will you need an environmental permit, or can a permit be transferred from an existing factory? What discharges will be made from site? Permits / licences / consents. Other issues to think about: Residential area? Noise complaints? Flood risk? Energy supply? Waste management? Traffic movement? Pedestrian bottle necks? How will your new facility achieve Net Zero?

Finance

Failure to consider what funding the business needs to finance the project at the outset could mean that your plans are not viable. Click for our checklist

Finance Checklist

What's the best way to structure your finances, including any debt finance? Start planning early.Common routes to funding include: balance sheet loans, overdrafts, asset finance, project finance, equity investment, venture capital, funding from significant suppliers and other stakeholders.What's the most tax efficient structure? Are there any Government or tax incentives available?How will the new funding sit alongside any existing financing structure?
2

Making plans

Your initial concept is taking shape. Now’s the time to get a little more granular. These are some of the areas you should consider next, concurrently.

At every stage, we’re here to offer help and advice.

Workforce Planning

Will the existing workforce be retained or will you need to hire new people? For example, technical experts, rather than factory line workers?

If you are planning on retaining the existing workforce, consider what changes will be necessary (roles, duties, location). Consider whether TUPE applies and/or whether any redundancies or role changes need to be made. You will need to commence consultations with employees in good time and factor this into the project timeline.

Businesses will often want commercial agreements in place (or at least heads of terms) before communication with employees begins. If this is the case, confidentiality about the plans is paramount and flexibility should be built into contracts regarding the employment position.

Have you considered how you might upskill your workforce? You may want to invest in training or make use of apprenticeship programmes.

If you are recruiting new employees, have you factored in time for recruitment campaigns? Recruitment processes can take time. Particularly if you are recruiting from overseas (where it can take time to secure a visa) and/or if you are recruiting highly skilled individuals who have lengthy notice periods and/or restrictive covenants. If you are considering recruiting specialist individuals from overseas, do you have a sponsor licence and are you familiar with immigration processes?

Build & construction

Have you considered the Construction Design and Management Regulations and allocated responsibility? Delays and disputes over payment frequently arise during the course of a construction project. For example with regards to the sum to be paid in each interim valuation. To avoid disputes over payment, it is important that the contract documents provide for an adequate mechanism for payment, a clear valuation procedure for changes and additional works, and a dispute resolution mechanism.

Should the worst happen, you may need to participate in formal dispute resolution proceedings such as adjudication or court proceedings. Do your contracts provide adequate protection?

How can your construction contracts protect you? Consider how to appropriately allocate this risk of delay between your business and the Building Contractor, for example by way of liquidated damages for delay, a right to augment the Building Contractor’s labour, and/or a right to terminate an appoint a replacement Building Contractor.

Technology & machinery

What smart-technology are you using? Automated machinery? Artificial intelligence? Augmented realities? Digitised processes? Will the use of new technologies assist you in achieving net-zero? You will need to determine whether you are or developing your own smart-technology or procuring it from a third party supplier.

To maintain a market advantage, you will need to protect your ideas. Th intellectual property created when developing artificial intelligence or smart machinery must be carefully considered. Design ideas hold value – would you be comfortable freely handing these over to suppliers? You may want to impose strict use restrictions on suppliers or partners, or even take steps to prevent them disclosing the existence of the project altogether using confidentiality agreements.

If the technology for the machinery to be installed already exists, there will be a requirement for an IP licence. If the technology is being designed by you, you will need to ensure that you own the rights to that technology.

Consider how the use of smart technology affect your workforce and whether you have the right people with the right skills to develop and/or use the technology.

You will need a contract for the construction, supply and installation of the machinery. This may include specialist mechanical and electrical engineering contracts.

Finance

Have you chosen your source of funding?

It’s not as easy as simply applying for the finance. You will need to negotiate finance documents. These include property and development funding, asset finance, project finance and working capital facilities.

You may also need the negotiation of inter-creditor documentation regulating the priorities and rights of and relationship between different categories of funders.

There may be pre-funding conditions to meet – which may require due diligence reports.

Commercial arrangements

What are your existing arrangements with suppliers and service providers? Will you be retaining those relationships, modifying them or terminating them? An examination of existing terms will be required with a view to variation or termination.

What do the employment/TUPE provisions of existing commercial agreements say? You will need to consider who is on the hook for litigation risks or employment claims/redundancy costs.

If the business does not have adequate remedies in its contracts procuring underpinning technology, it could find the entire project held up by an IT supplier with no means for recourse or recovering losses.

By not planning properly at the outset for how IT contracts can be transitioned away from, the business may have a long frustrating and expensive experience when later trying to move to a new provider.

Are there any conditions included in new contracts, whereby if they are not met you will be the hook for costs?

Will there be any transitional services agreements in place while transitioning from one service provider to another (or where insourcing is a function)?

3

Making the move

The construction of the smart-factory is now complete and you’re now ready to make the move. What do you need to think about?

Who is going to make the move for you? You will likely need to sub-contract this. Have you thought about closing down your previous site, and potentially disposing of or redeveloping it? Will there be any overlap of facilities until you are confident in the new system? How might this impact your employees and your commercial contracts when running in parallel? Do you have all of the necessary permits, licences and insurance products in place to make the move and start running the facility?

Post-construction

Have you received the information you need to operate and maintain the building (e.g. owner’s manual, user’s guide, health and safety file, building log book)? Have all warranties and product guarantees been provided?

Contract management

Plan ahead and understand the legal options available for exiting supply contracts that are no longer required and starting new ones to mitigate the associated costs.

Environmental

Does a permit need to be surrendered? Does the old site need to be remediated or cleaned up? Plan this at an early stage to minimise costs and delays.

Regulatory permits and licences

Consider whether a permit, and any other licences, are required and factor this into your programme. This issue has the potential to cause delay so it is important to think ahead.

Technology

Don’t be passive: actively manage the deployment of new IT systems. Are implementation milestones being hit? Is your business ready to meet any dependencies that the supplier has raised?

Workforce management

There may be a move to a new geographical location, changes in personnel and new working practices/patterns. Ensure you continue to communicate and consult with your employees at this crucial stage – remember your workforce is your key asset.

4

Troubleshooting

Issues may be encountered at any stage of the project, as identified in each of the first three sections above, which may result in you taking or defending legal action. Some of the following issues may arise during the life cycle of your new factory:

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Planning consents

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Does the planning permission contain conditions which prevent you operating the site as you wish? Seek advice on any alleged breach or any restriction that needs to be amended.

Environmental / noise complaints

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Proactively assess potential for complaints to arise. On receipt of complaint, review operations and seek specialist advice swiftly. Together with advisers, seek to engage with complainant before any issues are escalated.

Workforce issues

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Implementing new ways of working may result in a heightened risk of employment claims. People may be unsettled, raise grievances, or there may be redundancies. Ensure you carefully manage the consultation process and consider employees’ concerns.

Breach of contract

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Does your contract provide flexibility? What are the termination/suspension options? Are there force majeure provisions which may excuse performance? There are alternative ways of performing and/or mitigating risk including non-contractual solutions.

Financial distress of contracts / suppliers / customers

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Check contractual obligations and liabilities in financial hardship/insolvency scenarios. What are the termination/suspension options? Are there guarantees/indemnities/performance bonds or other forms of commercial assistance? Does insurance cover assist?

Construction issues

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The construction process is unpredictable. The contractual variations regime therefore requires careful consideration. It determines the employer’s ability to change the scope and the extent to which the contractor will be allowed additional time and money for such changes.

Latent defects

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Seek specialist advice immediately to avoid falling foul of limitation periods. Collate your documentation including photographs, contracts, warranty and insurance. Consider health and safety implications for employees and others on site.

Structuring of acquisitions & disposals

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The key to a successful acquisition or disposal is to plan ahead. Make sure advice is sought early to ensure that the transaction is structured in the most tax efficient way.

Intellectual property rights

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Technology research and development often leads to new Intellectual Property (IP). It’s important to capture this IP and consider who owns it and how will it be licenses between the parties.

5

Business as usual

Once you have made the move and are up and running, and have ironed out initial troubleshooting issues — it should be business as usual, right? Any big project or change will result in you re-thinking the way you do business. What should you think about? Is your approach to Environmental, Social and Governance matters up to the mark?

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People & planet

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How can you ensure that you put “people” and “planet” at the heart of everything you do? Consider whether your new technologies can be developed further to assist in achieving net-zero and consider whether you can put green employee benefits in place for staff. Learn more

Diversity & inclusivity

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How do you achieve a diverse and inclusive workforce? There may also be issues with biased or discriminatory artificial intelligence – the law on regulation and accountability has not yet developed to combat this, which could leave you liable.

Ways of working

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In addition to considering how the new set-up will affect your ways of working, you may also need to consider how it will impact your customers. For example, will it change how you supply them or the way you deliver? If so, do you need to vary your existing contract terms? 

HR

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You will need to manage ongoing HR issues, particularly if terms have been changed and new ways of working have been implemented. Ongoing sponsor licence management will be required where you have recruited overseas nationals. 

Technology

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You will need to maintain the technology and equipment, which may be done by external suppliers. Are service providers meeting required service levels? If not, do remedies under the contact need to be considered? Do you need to consider re-negotiation of contracts with suppliers? Learn more

Intellectual property

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How quickly will the new technology become out-dated? With ever-increasing developments, you will need to keep up-to-speed and continually develop that technology. You will want a policy to protect the intellectual property at the facility and capture any arising intellectual property.