With a real chance of leaving the EU with no deal-
there is increasing concern about potential future trade and regulatory
barriers between the UK and the EU, as well as the ramifications from political
upheaval and public frustration.
Aside from this, the biggest
risk to supply chain management could well come from another factor: time.
Border congestion, additional
documentation and customs checks will
slow the flow of goods, leading to increased lead times and all-round supply
chain challenge. Brexit will also impact non-EU international trade and
domestic trade, so businesses cannot afford to sit back and wait.
Current credible options for
the UK include both hard and soft Brexits. A soft Brexit would likely see the
UK remain strongly affiliated with the EU single market and reach a tariff-free
agreement on most goods. A hard Brexit would likely see the UK leave the EU
single market and customs union.
Both scenarios will lead to
varying degrees of disruption, interrupting cross-border trade and greatly
altering the landscape of supply chain operations.
The Impact of a Soft Brexit
Both the EU and the UK have
confirmed they are keen to avoid Britain leaving without a deal. MPs voted in
significant numbers for either a soft Brexit or a second referendum. The least
damaging of scenarios; what are the likely consequences of a soft Brexit for
supply chain operations?
The UK remains
aligned with EU market rules
and logistics costs (short-term)
risk – sterling has been volatile since the referendum
congestion around Dover, Calais, Dunkirk, Dublin and Holyhead (short-term)
Overall delay and
increased lead times (short-term)
take time and can cause political issues
The Impact of a Hard Brexit
A hard Brexit would mean that the UK
leaves the EU and ceases to be a member of the single market and any form of customs union with the EU. A hard Brexit will mean that the UK leaves the EU with
no form of free trade agreement. The most
disruptive of scenarios; what are the likely consequences of a hard Brexit for
supply chain operations?
import/export controls – the UK may operate differently following a hard
Brexit, goods could be sanctioned or banned in some countries
paperwork – such as declarations and certificates of origins
Border delays –
long-term, causing the most risk to temperature-controlled and perishable goods
inspection points/screening – similar to checks already in place on imports
from non-EU destinations
compliance – EU and UK law may diverge meaning that UK exporters/manufacturers
will have to comply with different laws in order to export to the EU
rate volatility and pressure on pricing and costs
Insolvency risk –
volatility and disruption could see suppliers/partners go out of business
VAT – no
indication yet as to how this will work, but confirmation that this EU tax will
Whilst there is significant
exposure for supply chain operations, there are steps that you can take to
prepare for Brexit and mitigate risk.
Key Areas to Consider
Businesses need to plan for both
soft and hard Brexits and understand which scenarios present the most risk to
their supply chain.
Map your supply
chain to identify high-risk contracts
customers into categories; those that trade between the EU and UK, those that
trade between the UK and non-EU countries and those that trade domestically
customers who do high-level trade and will be most affected
customers and suppliers – those that could have the highest level of financial
impact on you
standard operating plan (SOP) for all high-risk clients and plan contingencies
the custom classifications for goods, check what the World Trade Organisation
(WTO) tariff would be for UK import/exports, and potential EU import/export
provisions for border costs and delays
long-term contracts that could be counter-productive
in contingency time for deliveries
check all partners and suppliers – smaller organisations are most at risk
hedging for currency fluctuation
abreast of all new regulatory and border developments
a logistics and supply chain specialist
Key Opportunities to Explore
Alongside the risks of Brexit, a number of
opportunities exist. Your operation and processes may already be overdue a
review. Supply chain continues to be one of the most pressured departments
within most organisations. There is relentless demand to meet strict deadlines,
improve the customer experience and streamline costs.
For example, a weak pound should make UK
suppliers more cost effective. Can your business capitalise on this and derive
benefits? A soft Brexit will allow the UK to enter into trade agreements with individual
countries, opening up potential new markets. Are there new opportunities for cross-border
trade or cheaper supplies? You may wish to consider outsourcing your supply
chain, leaving your fulfilment and distribution to experts who will be able to confidently
navigate the post-Brexit climate on your behalf.
EC Group provides tailored,
comprehensive logistics and fulfilment solutions and operational peace of mind.
We offer national and cross-border delivery solutions designed around your
business, industry and needs.
To speak with one of our
experienced account managers about your supply chain management, or for advice
on the impact of Brexit to your supply chain operation, please get in touch.