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Mitigating Brexit-related Supply Chain Impacts

As Britain begins edging towards the end of the Brexit transition period, many small businesses have expressed their concerns regarding preparation planning. Currently, the outcome is unclear as the EU and UK go back and forth in an effort to formulate a mutually beneficial trade deal in an effort to avoid a turbulent break-up.

If there is in fact no deal by the end of the year and there will be no agreement to protect roughly $1 trillion in annual trade from tariffs and quotas, both EU and UK businesses will surely suffer. No deal at all would result in a border conflict, financial market shocks, and severe supply chain disruption in addition to the disruptive economic cost of COVID-19.

As it stands, trade relations between the EU and UK are based on the freedom of movement for labour, goods and services, and capital. While negotiations continue, British businesses are unsure which new set of rules they will be operating under in the new year. The good news is that many businesses have taken steps to protect their supply chain from the impact of COVID-19 and those steps will place them in better positions to adapt to a post-Brexit trade landscape.

In the event of a no-deal scenario regarding trade, Britain would no longer have zero tariffs and zero quotas access to the European market. Therefore, Britain would default to the World Trade Organization’s trade terms imposing a global UK tariff on EU imports. Without pre-established tariff barriers, consumer and business prices will increase. Sectors likely to be most affected are those that rely on just-in-time supply chains such as auto, textile, consumer goods, pharmaceuticals, food, and beverage, etc.

Although supply chain leaders have been anticipating Brexit for years now, the ongoing uncertainty of a deal or no deal status, plus added complexity due to the global pandemic, has created an unclear picture for the future of business and what organisations are planning for. Either way, businesses will have to manage the impacts of potential risk profiles, spiraling costs, and revised commercial regulations.

Whatever the outcome, there are commercial steps organisations can take to create a foundation for business continuity:

  1. Audit your business and access tariff and non-tariff impacts of a no-deal scenario

  2. Map out the physical flow of goods from raw materials to finished, from the country of origin to country destination. Understand which flow will likely come under pressure from Brexit.

  3. Assess which routes will create logistical pressure for the flow of goods. Avoid high delivery risk, if possible.

  4. Identify inbound and outbound shipments scheduled near or around Brexit cut off date. Communicate directly with consumers regarding potential issues or inconveniences. Reprioritise and identify key customers and stakeholders as well as service priorities.

Businesses should position themselves in the global trade environment by protecting themselves with scenario planning and running impact assessments of the potential implications for production, costs, and cash flow from supply chain disruption and delays.

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