Brexit’s Impact on the Supply Chain: How Companies Can Brace for Impact

Ready or not, Brexit is coming, and its impact is going to be felt by companies around the world. Unfortunately, without a deal in sight, it’s very difficult to predict what this unprecedented decision will mean for global supply chains in both the short and long term. But as the March 29 deadline draws ever nearer, companies with a wait-and-see attitude may face a nasty surprise when Brexit arrives.

“The likelihood is, there will be no deal,” says Donal Brennan, CTSI-Global’s Vice President of EMEA Operations and Global Projects. A no-deal Brexit could cause massive shipping delays and hefty tariffs, with some economic experts predicting that British exports shipped as early as this week may be affected.

For companies operating primarily within the UK, Brexit could change everything. But any company that relies on British imports or exports even a little may feel Brexit’s ripples along its supply chain. Here are a few steps businesses can take now to bolster their supply chain and brace for Brexit’s impact—whatever that impact may be.

Prepare for changing trade tariffs: understand how goods will be taxed and reclassified

Today, goods can move between Britain and other countries in the European Union (EU) without facing customs duties. In the event of a no-deal Brexit, that will immediately change. UK shippers moving goods into the EU will have to pay the same customs duties that other non-EU World Trade Organization (WTO) members currently pay. Goods imported from the EU into the UK will also be taxed, at a rate set by the UK Government.

These additional regulations could spell higher costs, more paperwork, and the potential for significant delays if shippers are unaware of what’s required of them.

Brennan recommends that companies take a serious look at their supply chain now to understand where suppliers are based and which commodities may be reclassified. The UK Government has provided some guidance around this here. And for those that source raw materials primarily from the UK, it may be time to look for alternative suppliers in other countries, since their trade tariffs are already defined.

Brennan also suggests identifying a customs broker—and soon.

“Most of the clients I deal with have Brexit departments that are setting up processes to handle additional customs regulations,” he says. “Many are also hiring additional support staff to manage difficulties with their inbound and outbound supply chains.”

Build a buffer: develop a longer supply chain to ease the blow of delays

Concerns around customs and border issues have yet to be resolved, so delays are on the horizon. This has the potential to severely damage customer trust. And since many shipping agreements were written before the Brexit vote, companies may not be able to recover costs associated with these delays, because their contracts simply don’t cover them.

So what can shippers do to prepare for delays?

“Many big companies are relocating out of the UK,” says Brennan. “But some can’t relocate because they primarily service the UK. They’re currently stockpiling—building a buffer so that it doesn’t impact their supply chain capabilities right away.”

Building a longer supply chain can help cushion the impact of delays. And it may not hurt to follow in the footsteps of the stockpilers.

“They’re thinking about worst-case scenarios,” Brennan says. “People have to start thinking that way.”

Stay informed: follow Brexit negotiations closely to keep abreast of new developments

The biggest piece of advice Brennan has for companies around the world? Follow the news.

“Keep in touch with what’s going on,” he says. “It’s front-page news in the UK and Ireland, but not as much elsewhere. So there’s confusion about what it means and what the implications are.”

Concerned about how Brexit will impact your supply chain? CTSI-Global’s wide-ranging expertise can help you weather the storm. Contact us today.

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