Can your Supply Chain Cope with a Hard Brexit?
There is increasing talk of the possibility of the UK leaving the EU without a trade agreement. Failure to reach agreement by 29 March 2019 (Brexit day) will impact on how goods and materials (goods) are dealt with at the UK border.
In a paper on the subject the Institute of Government has analysed the likely consequences of a hard Brexit at the border and identified a number of business critical issues.
So what are the issues and how might businesses plan for a hard Brexit?
We (don’t) have the technology
For customs, HMRC rely upon a 1989 IT platform that should have been retired years ago. It can process about 60m declarations a year but it is estimated that on a hard Brexit, there will be an additional 200m declarations a year. A new IT platform is due for delivery early 2019 but even then it will need to be reconfigured to deal with a hard Brexit since it was scoped on the assumption that the UK remains in the EU.
What about the Private Sector?
A hard Brexit would require exporting businesses to start filing export declarations. At the moment all they generally need to do is complete a VAT declaration. On a hard Brexit it’s estimated that about 180,000 traders, from SMEs to large organisations, will need to make customs declarations for the first time – a fairly detailed process in itself. But businesses are in a bind. In the absence of any clear framework for new trading arrangements, they don’t know what to plan for.
What’s in your Lorry?
A hard Brexit will almost certainly increase the need to carry out checks at the border. That will require more physical space at ports for customs offices, borders posts, lorry parks and warehouses. In reality there is not enough time before Brexit day to make those changes. And it is not only the ports in the UK that will have to adapt; ports in France such as Calais and Dunkirk will have to be adapted, since they will also have to implement a new regime for goods arriving from or being shipped to the UK. This could result in the nightmare scenario of lorries queueing for miles at the borders.
There is talk of creating customs clearance depots away from the ports but these too will require physical space to be identified, permissions obtained and infrastructure developed. It seems hard to believe that this can all be in place by Brexit day.
What does it mean for business?
According to the Institute of Government paper, there is a real fear that if there is a hard Brexit, UK ports will slow down to a snail’s pace.
If your business is one that exports to the EU or relies upon imports from the EU, then there could clearly be very significant disruption.
What to do at this stage?
Whatever the political sentiment, contingency planning is a sensible precaution and you should now at least make sure you have visibility where your business sits in any export or import supply chain and consider what your options may be.
Questions you may want to ask about your business (and know the answers) include: does your business export goods to the EU? Do you know whether any goods you sell are incorporated into goods that are exported (ie. part of an export chain)? Are there alternative domestic buyers? Does your business rely upon goods imported from the EU? Do any of your suppliers rely upon products imported from the EU? Are there alternative UK based suppliers? Does your business rely on moving goods through the EU to a destination outside the EU? Do you have contractual exposure if there’s a hard Brexit? What about new contracts that you are entering into – how can you protect yourself?
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