What does your post-Brexit Supply Chain look like?

Posted on April 9th, 2018 by

With less than a year until the deadline for finalising Brexit negotiations, we have a look at the ways in which it could change your business.

In order to prevent free movement of people, the UK must sacrifice free movement of goods as well, leading to increased costs of importing and exporting.

Possible impacts on exporting –

Exporting could become less profitable for many reasons post-Brexit. Firstly, the uncertainty surrounding Brexit could cause volatility between the Pound and the Euro, leading to an increased use of forward contracts which can involve a large amount of forecasting and negotiation. Since free movement of goods could be abolished, it is likely that businesses will be required to pay export duty on supplies that they sell to EU members, provide an export declaration and obtain an export licence for certain goods. Overall, exporting can be expected to become a more expensive and time consuming process.

Possible impacts on importing –

Importing could be particularly costly for food service businesses post-Brexit as customs compliance checks could increase by five-fold, leading to longer import times. It is vital that food is imported as quickly as possible to prevent it spoiling and this increased pressure to get food through customs quickly will likely drive up the price of importing food, meaning businesses will have to source locally to maximise profitability. This will be a challenge as currently 30% of all food consumed within the UK comes from the EU, transported in trucks. For other businesses, import duties and taxes will likely increase the cost of importing and you may even need an import licence to import certain goods into the UK. Broadly speaking, it can be expected that importing will be more expensive for all businesses post-Brexit.

KPMG have stated that –

“If the UK leaves the EU without a trade deal or transitional agreement, we can expect both higher prices and a huge spike in red tape at the borders. As such, the top priority for businesses is to fully understand their own supply chains: the volumes and values of the goods they ship back and forth and which countries they’re importing to and from. Only then can businesses obtain a degree of insight into their own operations and exposure to risk.”

Therefore, it is vital that businesses start planning for Brexit now to stay ahead of the curve and remain competitive throughout the entire process. It is almost certain that a supply chain re-evaluation would be beneficial for all UK businesses to help identify possible opportunities to source locally.

Action Plan:

  1. Audit your entire Supply Chain – Understand your suppliers and build strong relationships with them to enable post-Brexit flexibility.
  2. Evaluate the length of existing supplier contracts and the possible implementation of break clauses.
  3. Evaluate the most risky areas of your business and prioritise strengthening these areas before 29th March 2019.
  4. Research how Brexit could affect your sector – e.g. food service businesses potentially being hit harder than other businesses.
  5. Look for British suppliers that can act as substitutes for current European suppliers.

While none of these circumstances are guaranteed, there is certainly a risk involved with Brexit and businesses must adapt and manage these risks to the best of their ability, in fact the Chartered Institute of Procurement & Supply (CIPS) found that 40% of UK businesses that use EU suppliers are currently looking for British replacements.

Are you concerned with how your supply chain might change post-Brexit? Why not get in touch with us today to see how we can help you?