27 Mar 2017
It’s official, on the 29th March Theresa May triggered Article 50 and the United Kingdom has now begun the process of leaving the EU. This historic decision not only has political ramifications, but will greatly impact many UK industries and businesses.
It’s important to note that in the initial aftermath, Brexit is likely to have limited immediate impact. The UK will have to untangle itself from the mass of EU legislation, which is expected to take years, rather than months. However, even though the consequences won’t be instantly apparent, organisations still need to have a Brexit plan in place. Failure to consider forward-future implications will leave you unprepared for what’s next, whatever that may be, which is why it’s essential to adopt a proactive, rather than reactive approach.
So, what can we expect with regards to Brexit and its impact on supply chain?
Ambiguity continues to surround Brexit, but one thing is clear; it’s going to get complicated. With the recent revelation that the United Kingdom may not remain in the single market, it could mean more paperwork, increased bureaucracy and new obstacles for businesses trying to continue to trade across Europe. Logistics may suffer, as operations move in or out of the United Kingdom and encounter border control, resulting in inventory stock-piling as organisations try to buffer extended lead times. We also must consider that with different access to the EU single market, the United Kingdom may be a less attractive option for foreign investments, at least until the dust settles and trading parameters become clear.
Businesses with complex supply chains will likely be hit hardest – such as industrial, retail and grocery – as they try to mitigate the repercussions of the weakened pound, increased costs and potential new tariffs. With many organisations relying heavily on imported goods, the United Kingdom will bear the brunt of increased costs in the form of pricier goods for consumers and consequently, reduced revenue and profit for businesses as disposable income decreases. However, there is opportunity for organisations to explore options of moving sourcing back to the UK, although this may be limited due to the global nature of most supply chains.
Despite the Government’s recent white paper on Brexit, it remains unclear whether the United Kingdom will experience a ‘hard’ or ‘soft’ Brexit. Facing this continuing degree of uncertainty, it’s essential for organisations to have contingency plans in place for multiple scenarios. Using risk management assessment processes, data analysis tools and modelling variables, organisations can identify crucial deciding factors for informed decision-making. By accounting for varying possibilities not only will businesses be equipped to tackle arising issues more effectively, but will also gain an advantage over their less-prepared competitors.
One thing is certain; flexibility, agility and efficiency in supply chain will become ever more important in a post-Brexit world.