- 31 January 2019
- Written by: Supply Chain
- Category: Supply Chain
It is certain that Brexit is taking up the vast majority of the UK government’s focus as the time for Britain’s withdrawal from the EU on 29 March approaches. Though, the U.K. and the EU had 18 months to negotiate a smooth transition out of the customs union; less than 100 days from the official Brexit deadline, no deal has been reached yet. In fact, firms across the economy are bracing for the possibility of the UK leaving the EU on 29 March without a deal after parliament resoundingly rejected Theresa May’s withdrawal agreement.
“Until now there is no clear picture on how all parties involved will have to deal with the situation after 29th March 2019,” the European Shippers Council said in an emailed press release. In fact, the U.K. government recently instructed all its agencies to actively plan for a no-deal Brexit, according to Reuters.
A no-deal Brexit means the UK will leave the EU and have to resort to hard borders, meaning people and goods will need to be subject to stringent checks before they can enter the country.
The impact of no-deal Brexit on Retailers
The aftermath of Brexit could lead to shortages of food and medicine. This is because imports will be affected and supply chains across the UK will suffer if the UK leaves on March 29 with no deal, as it is currently on course to do.
As reported by Perspecs, a number of UK businesses use a “just in time” method for their chains of supply, allowing them to keep full shelves and a constant flow of goods coming in without taking up masses of storage space on products they will need at some point in the future. The problem with this supply method is that a disruption in one part of the supply chain has a knock on effect.
For instance: if a product is late to arrive at one part of the supply chain then it will be late for the subsequent parts too, eventually resulting in it not being on the shelves when it should be. Each goods lorry entering the UK could take up to eight hours to fully check.
The European Sea Ports Organization warned in March 2018 a no-deal Brexit could turn ports into bottlenecks and “disrupt long established supply chains.” Moreover, the European Shippers Council warns no amount of preparation can completely prevent “big disturbances in trade.”
Normally, the UK is used to a regular flow of goods coming in and thanks to the customs union that comes with EU membership the rules and regulations are the same on both sides of the border in member state countries. Hence, this is what will lead to shortages, with delays at the border stopping goods being imported as smoothly as before and interfering with the supply chains of thousands of British businesses.
Stockpiling in preparation for a no-deal Brexit
Due to the current uncertainties, for many of these companies stockpiling is the best option, though 75 per cent of the UK’s warehouse space is reportedly full up leaving them with fewer places to store what they need. It is obvious that demand isn’t expected to change, therefore supply will need to be altered.
Some people are actually taking this situation seriously and has started stockpiling food in their own homes, filling their own “Brexit box” with things they don’t want to risk running out of. In fact, certain businesses have caught on to an opportunity with this, selling supply boxes costing £300 to “hundreds” according to the BBC. In case, you are going to stockpile food yourself then The Guardian recommends that you stock up on things not produced in the UK.
Various firms are concerned about a No-deal Brexit:
- Novartis: The Swiss pharmaceuticals company Novartishas said it is stockpiling drugs in the UK before a possible no-deal Brexit, which it warned would be “hugely impactful” for patients. The Basel-based company said it imported 120m packs of medicines to the UK from the continent each year but suggested a no-deal Brexit would affect supplies.
- Mace: The chief executive of Mace, Mark Reynolds, has said the company would be liable for up to £10m in damages if all of its jobs were held up by materials shortages caused by a no-deal Brexit. He said that the most pressing concern about the UK leaving the EU without a deal at the end of March was the impact on importing materials – such as steel, aluminium and timber.
- Burberry: The British luxury goods company and one of the country’s highest-profile exporters, has said a no-deal Brexit could lead to tens of millions of pounds a year in extra costs for its business. Burberry imports and exports significant volumes of raw materials, samples and finished goods between the UK and the EU, and it is the logistical delays that would impact design, product development and customer fulfilment.