It’s about a month to go before Britain leaves the European Union (EU), and while the UK’s departure is certain, the exact terms of how the country will leave has yet to be decided.

This makes planning for Brexit exceptionally difficult for businesses in the UK and across the world. Organisations cannot adequately prepare if they don’t know exactly what they need to get ready for, and for supply chains, the lack of clarity is crippling.

Some of the extreme Brexit scenarios have described situations where tonnes of fresh food are left rotting on the way into the UK because the goods can’t pass through customs.

Throughout this article, we’ll present some of the likely scenarios Brexit may have on procurement and what you can to do to adequately prepare your supply chain.

Running out of options

Theresa May’s Brexit deal defeat in parliament, earlier in January, narrows the number of options the UK can leverage in a deal with the EU. We’ve detailed her remaining options below:

#1 – Renegotiating with the EU

After two and a half years, Theresa May put her painstakingly negotiated deal forward to the house of commons – for it to be rejected overwhelmingly by MPs from all parties. She was given a fresh mandate to renegotiate elements of the deal, the sticking point being the all-important backstop, an arrangement designed to avoid a hard border between Ireland and Northern Ireland.

The backstop proved to be an issue for MPs in parliament because of the nature of the agreement. This is because in the legal text pertaining to the details of the backstop, if it is initiated, it can only be dissolved if both the EU and the UK agree for it to end.

Effectively, a scenario post-Brexit could emerge where Northern Ireland is treated differently to the rest of Britain, under EU laws and rules, separate to UK, and subject to EU law and regulations – effectively threatening the constitutional integrity of the country.

Theresa May is trying to seek legal assurances that the EU would not keep Northern Ireland in the backstop against the UK’s will, but Brussels is unwilling to budge on the matter – considering it a ‘red line.’

It is difficult at this stage to comment on how this will impact the EU, and of course, supply chains as whole, however, what is clear is that this arrangement could see parts of the UK being treated differently if implemented. Goods may be subject to customs checks on both the UK and EU borders.

 

#2 – No deal

This scenario, the hard-Brexit scenario, the UK leaves the single market without a deal in place. The country would switch to World Trade Organization (WTO) tariffs when trading with the EU, which will invariably result in far more expensive trading costs, usually associated with non-EU states.

However, because the UK will no longer bound by EU law, it will be free to negotiate deals with non-EU countries for competitive tariffs – but this process can take many years to complete.

No deal would be a worst-case scenario for supply chains across the UK and the EU. Disruption to supply chains is extremely likely, meaning goods may take longer to acquire and could be more expensive. This is because of the inevitable administration and tariff costs on goods entering and leaving the UK.

Right now, according to leading analysts, a no deal Brexit is increasingly likely because of the political impasse in parliament and Brussels.

#3 – Remaining in the EU

Stopping the entire Brexit process is one option available to Theresa May and her government. It would end uncertainty and ensure supply chains to and from the EU retain their existing processes and infrastructure.

Right now, considering the UK governments stance on Brexit, it seems unlikely they’d choose this option over the two discussed previously.

Ask these questions to prepare your supply chain for Brexit

Preparing your supply chain for Brexit centres around ensuring your business can continue to operate as soon as Brexit is initiated. As such, we’d recommend considering these points:

• Is any of your inventory provided by the EU?
• What is the current lead time on your inventory?
• Are your suppliers prepared? What provisions have they been taking?
• Is delivery speed a crucial part of your service?
• How much working capital can you afford to commit to stockpiling inventory or investing in ‘insurance options’?
• What preparations you we take without capital investment, or what can be included in ‘business as usual’ spend?

Three tips to help you prepare your supply chain for Brexit

#1 – Is stockpiling an option?

Some organisations, like leading supermarkets and automotive manufacturers are stockpiling goods in the event of a no deal Brexit.

Stockpiling, to keep your supply chain moving in the immediate aftermath of Brexit could be a strategy you could take.

#2 – Get reassurance on areas outside of your control

While parliament remains paralysed on the issue of Brexit, that doesn’t mean that you can’t take steps to prepare that are outside of your control.

Establish lines of communication with your suppliers and assess their capability of maintain delivery of goods after post-Brexit.

#3 – Treat Brexit as an emergency

You’ll have prepared for other issues in your supply chain and identified an appropriate emergency plan, so use your emergency plans as a template for planning what you need to do after Brexit.

You might have had experience with extraordinary events, like the heatwave last year, which led to shortage of CO2 and impacted meat and beer supplies. Supply chains drew up emergency plans to deal with these issues, so replicate this process and speak to the relevant people to prepare appropriately.

 

By Daniel Ball, Business Development Director, Wax Digital