The cost of Brexit will be staggering. Prepare for impact.
Jul 27, 2018 Comments (0)
According to a recent study by management consultancy Oliver Wyman in partnership with law firm Clifford Chance, Brexit will cost EU companies £31 billion and UK companies another £27 billion.
Yet experts are saying that what most companies either don’t know or are ignoring is that getting ready for Brexit changes ahead is their single best way to mitigate its effect on their bottom line. ''Failing to prepare is preparing to fail,’’ as Jessica Gladstone – a partner at Clifford Chance - puts it.
‘’Given the difficulty of knowing exactly what turbulence lies ahead, many businesses are putting Brexit in the 'too hard' box’’ she said. ‘’However, exporters who understand Brexit's risks and rewards will be able to implement the right plans at the right time to ensure they are amongst the winners rather than the losers.”
Most UK companies are unaware that Brexit will force them to complete import and export declarations for the first time in over 40 years, and that the cost of those added declarations will have a major impact on their profit margins unless they act now and upgrade their customs IT system landscape.But they aren’t doing anything because they are waiting for the final details of Brexit to be confirmed. A highly risky plan considering progress to date. The UK proposal was published in the Policy Paper of 12th July and media reports about the EU response twelve days later make it clear that we can expect more rounds of negotiations.
And whichever way it goes, the fact remains: Post Brexit, the burden for export and import declarations will be huge. So, why wait for all of the Brexit details to be disclosed? Instead, shouldn’t you be considering upgrading your IT and digitising your customs management?
Clearly, investments in global trade operations at this point should be aligned with what’s needed to prepare for Brexit. For internationally active companies, this includes investing in new market research and looking for opportunities to automate supply chains – in particular cross-border transactions. Businesses urgently need to take a close look at the structure and network of their supply chains and mitigate risks where possible.
For example, by establishing flexibility in sourcing and selling into different markets across the globe. Smart sourcing includes taking advantage of free trade agreements to make products more competitive and increasing efficiency through automation in areas such as product classification or supplier’s declarations. And a set-up for automated import and export filing or broker integration delivers the foundations to serve customers in new markets without running into border delays.
Smart automation allows companies to accelerate the various customs processes and save valuable resources. Integrated customs management platforms deliver additional benefits through complete transparency of customs processes in a single secure and automated solution – regardless of whether you manage your customs processes locally, centrally, or in partnership with customs brokers.
And the good news about this kind of investment is that it won’t be wasted whichever way Brexit will go. Most companies plan for the next 5 to 10 years when they make plans for strategic investments, so it is crucial to understand the implications of Brexit for individual business models. We only need to look at the latest tariff disputes between the US and EU regarding steel and aluminium products to understand how dynamic global trade changes affect supply chains across the globe immediately.
Businesses need to implement solutions that drive forward their digitisation agenda while mitigating risks from Brexit as much as from other global trade changes. The time to take action is now.
Geoff Taylor is General Manager of AEB (International) Ltd in the UK and has been with the company since April 2017.