Why digital is key: Brexit risk mitigation and future supply chains
Mar 04, 2019 Comments (0)
Businesses in the UK and on the continent continue to suffer from the prevailing uncertainty surrounding the UK’s exit from the EU at the end of March.
Continued debates in the UK Parliament and political developments including the absconding of several MPs from both Labour and Conservative parties at the end of February put further strain on business confidence.
This uncertainty has prompted a number of companies to restructure, close their UK plants or move assets to the EU27 zone. More businesses are expected to follow suit. The business community, of course, is acutely aware that today’s supply chains cross many borders, and many products consist of a mix of parts from all around the globe.
Companies trading across UK borders are also aware of the options for trade after Brexit – be it the Switzerland, Norway, Bangladesh or Turkey scenario. But what will it be? As part of the EU, the UK automatically benefits from the trade agreements which the EU has negotiated with around 70 partners, including Japan and South Korea. But leaving the EU without a deal on 29 March, would render the UK a “third country” without own deals with its trading partners.
Well, almost. As of 21 February, only six “replacement” trade agreements had been signed: with Israel, the Palestinian Authority, Switzerland, The Faroe Islands, Eastern and Southern Africa, and Chile. The UK has also signed deals with the USA, Australia and New Zealand, but these are "mutual recognition agreements" and not free trade agreements. To date, the largest portion remains open.
A hard Brexit would result in massive supply chain disruptions and put the flow of goods from and to the UK at serious risk. Some ocean freight deliveries in transit have already taken that risk as they may reach their destination after March 29. Leaving the EU’s Single Market and Customs Union presents a complex change of procedures for UK parts in globally traded products, and for transactions across UK borders.
A transitional withdrawal agreement would give businesses more time to implement the required changes throughout their supply chains. This includes preferential rules, product classification, new customs tariffs, new trade agreements, export control procedures, import and export declarations or customs broker collaboration, and the integration of all relevant workflows, teams, and systems.
But even the 21-month “implementation period” envisaged in Theresa May’s withdrawal agreement isn’t a lot of time, considering all that’s required to implement a new framework for UK trade. It is also important to note that customs brokers, who will be – and already are – one of the businesses most affected by Brexit, are already overbooked.
To help the business community prepare, the government has published several notices and guidance documents, most recently the Notice to Exporters 2019/03 of February 1, 2019, which explains that licences will be required to export dual-use items from the UK to EU member states in case of a hard Brexit. At the moment, licences are not required to export dual-use goods between EU member states.
The key to success for businesses trading across UK borders is this: Digitisation. Mitigating risks and protecting supply chains is essential now. And regardless which version of Brexit will happen, digitising global trade and customs processes pays off anyway. That’s because automation and integration deliver value and flexibility, building the right foundations to not just survive, but to be competitive in today’s fast-paced marketplaces and dynamic global trade environments.
Iqubal Singh Pannu
Iqubal Singh Pannu is Senior Solutions Consultant at AEB in the UK and has been with the company since 2006. With considerable consultancy and project management experience, spanning several areas of the supply chain, Iqubal is advising companies on solutions for optimising supply chain performance and generating value through automated global trade and logistics processes.