While we still don’t know what will happen with Brexit, one thing we can all be sure of is that it will trigger major changes in supply chain management for many businesses in the UK and throughout Europe. In this guide we look into how businesses can prepare their supply chain operations for Brexit.
The Impact of Brexit On Supply Chains
Around half of the UK’s trade is with the European Union - making it the UK’s largest trade partner. As a result, Brexit is expected to cause major disruption to supply chains. One in six UK manufacturers say that supply chain disruption will be the biggest factor impacting their business post-Brexit.
And it’s not just British businesses that will be affected. One study revealed that a whopping 63% of EU businesses that work with UK-based suppliers expect to move some part of their supply chains out of the UK. For example, in a 2018 interview with BBC Five Live the European boss of Honda, Ian Howells, gave an example of how Brexit would affect their supply chain:
And it’s not just British businesses that will be affected. One study revealed that a whopping 63% of EU businesses that work with UK-based suppliers expect to move some part of their supply chains out of the UK. For example, in a 2018 interview with BBC Five Live the European boss of Honda, Ian Howells, gave an example of how Brexit would affect their supply chain:
“From an administrative point of view, we’d probably be looking at 60,000-odd additional bits of documentation we’d have to provide to get product to and from Europe. If we end up with WTO tariffs, we’d have something like 10% of costs in addition on products shipped back into Europe and that would certainly run into tens of millions. And likewise, when we’re looking at components coming the other way, again tens of millions in tariffs potentially coming into the UK. That impacts our productivity, certainly in terms of the flow of product, but also it does hit potentially our competitiveness. Of course, if we are shipping and competing against a European manufacturer in Europe, they’re not incurring those tariffs.”
Just 38 days before the original departure date, March 29th 2019, Honda announced plans to close down its sole British plant.
How will Brexit Affect Supply Chains
Tariffs
In essence, a tariff is a border tax charged on foreign imported goods. Currently, British companies can buy and sell products across the EU tariff-free due to the EU’s customs union. However, after Brexit takes place the cost of customs declarations and rules-of-origin checks will rise for UK imports and exports. This will result in significant supply chain cost increases for many businesses.
In essence, a tariff is a border tax charged on foreign imported goods. Currently, British companies can buy and sell products across the EU tariff-free due to the EU’s customs union. However, after Brexit takes place the cost of customs declarations and rules-of-origin checks will rise for UK imports and exports. This will result in significant supply chain cost increases for many businesses.
Delays
Congestion caused by a longer customs process are likely to result in massive delays. Experts predict a five-fold rise in customs checks, with customs declarations at Dover and elsewhere estimated to increase from 60m to 300m a year, and it is estimated that some 10,000 lorries may be held on Kent roads alone on a routine basis if there is no deal. According to a CIPS survey, customs delays of just 30 mins could bankrupt one in ten businesses.
Recruitment and Staff
Stricter immigration laws will make it more difficult to hire foreign workers to work within the logistics and supply chain industry in the UK. As Sally Gilson, the Head of Skills at the Freight Transport Association (FTA) succinctly put it:
Congestion caused by a longer customs process are likely to result in massive delays. Experts predict a five-fold rise in customs checks, with customs declarations at Dover and elsewhere estimated to increase from 60m to 300m a year, and it is estimated that some 10,000 lorries may be held on Kent roads alone on a routine basis if there is no deal. According to a CIPS survey, customs delays of just 30 mins could bankrupt one in ten businesses.
Recruitment and Staff
Stricter immigration laws will make it more difficult to hire foreign workers to work within the logistics and supply chain industry in the UK. As Sally Gilson, the Head of Skills at the Freight Transport Association (FTA) succinctly put it:
“European workers are a key supporter of the UK’s complex supply chain, undertaking vital roles in all areas of moving goods and services across the country to support manufacturers, retailers, schools, and individuals.”
Foreign Exchange
Currency rate fluctuations and volatility could increase the costs of raw materials and supply chains.
Currency rate fluctuations and volatility could increase the costs of raw materials and supply chains.
5 Reasons to Distribute from Ireland Post-Brexit
Ireland presents an attractive option for businesses seeking a new European distribution partner post-Brexit.
1. Shared Language
Post-Brexit, Ireland will be the largest English-speaking state in the EU.
2. Retain Access To The EU and The Eurozone
As a fully committed member of the EU and the Eurozone, Ireland has access to free trade with 27 EU states and has a further 53 EU free trade agreements across the globe.
3. Side-Step Customs and Excise
By aligning with an Irish partner when distributing past the UK, businesses can avoid the costs and delays caused by added customs and excise demands.
4. Irish Law Is Similar To UK Law
As the Irish legal system originates from the British one, there are major similarities between the two. This facilitates Irish business operating in the UK and vice versa.
5. Lowest European Tax Rate
Ireland has a 12.5% corporate tax rate, which is the lowest in Europe.
How to Pick the Right Distribution Partner in Ireland
With all of the uncertainty of Brexit, it will be important to find a distribution partner that you trust has the right experience and expertise to navigate these unchartered waters.
Liked this article? Why not check out our guide, “Brexit’s Impact on Retail”.
- Define your supply chain needs, challenges and risks in relation to Brexit.
- Based on these, outline the criteria you look for in a distribution partner.
- Assess the location and reach of the provider.
- Look at the variety of services offered and assess whether these meet your needs.
- Learn more about the prospective provider’s track record with clients of your size.
- Reflect on whether they have the ability to seamlessly integrate and take over your logistics function.
- Find out if they are committed to continuous improvement and technological advancement.
- Ask about the steps they have taken or are planning to take in preparation of Brexit.
Liked this article? Why not check out our guide, “Brexit’s Impact on Retail”.
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