Brexit – the potential impact on supply chains

  • Posted

After 47 years as a member state, the UK leaves the EU at 11pm today. From that moment, the pressure will be on to negotiate a trade deal by December’s deadline. The UK government plans to legislate against continuing negotiations beyond that point.

All of this may encourage businesses to begin implementing logistical plans to ensure their day-to-day operations continue to run smoothly. These will largely focus on how supply chains operate.

In the current climate, reviewing your supply chain procedures can help ensure efficiency and reduce the risk of contracts being exposed to Brexit headwinds. Time is of the essence. Any failure to reach a trade deal by end of 2020 is likely to lead to tariffs being imposed and free movement of labour coming under threat.

The sizeable majority secured by Boris Johnson gives the government license to diverge from EU rules and, again, this increases the urgency for businesses to prepare for a range of eventualities.

Identifying the destinations of any goods that your business sells is an obvious starting point, as is checking the need for the warehousing of goods. If these are threatened or made more difficult by Brexit, are there more viable options open to you? And how easy will it be to extricate your business from the existing arrangement?

Reviewing any contracts that you may have with businesses located in the EU is another vital step. Key points to consider are whether the contract was drawn up prior to the 2016 referendum and whether it contains ‘force majeure’ clauses that would legislate for significant events such as Brexit. The length of time over which the contract is due to run and any lead times involved are also important to establish.

The effect of Brexit on licensing and regulatory regimes may also come into play. In turn, this may impact on the composition or labelling of certain goods. Equally, for the purposes of GDPR, the EU will regard the UK as a ‘third country’ after Brexit and this could have consequences for the transfer of personal data between the UK and EU and its storage.

All the issues listed above have cost implications and businesses should seek to mitigate these as far as possible through careful contingency planning. A rigorous approach will also help prevent exposure to potential breaches of new rules and regulations, particularly in relation to competition law.

The prime minister’s official spokesman has told businesses to expect ‘extra processes’ after the transition period ends and divergence from EU rules is actively pursued. What that means in practice will be determined over the coming months. The UK’s intended direction of travel will be signalled by the prime minster in a speech that he’s expected to deliver next week…