What Impact Will Brexit Have On Supply Chains?

Brexit and the Supply Chain

In light of a ‘no deal’ Brexit looming, should international shippers be concerned?

With the rapidly approaching separation date in March of 2019, it is now more important than ever to think about the possible effects this might have on your supply chain!

It seems that there is still a lot that is yet to be resolved between the UK and EU (Such as the issue with a proposed hard border in Northern Ireland, the legal status of UK and EU citizens living in the others area after the split, and most importantly how much is owed between the UK and EU) and this leaves the world of commerce in a fickle position.

After the separation takes place in March there will be a prolonged transition period that will last through December 2020. During this time the UK will still follow Customs Union rules while allowing British companies to seek out and secure their own trade deals. However, these new arrangements will not be effective until January 1, 2021.  

There is still quite a bit to be straightened out in regards to post-Brexit trade regulations, and that instability is defiantly worth keeping an eye on. 

A Quick Look at Current Regulations.

As it is the UK falls under the same Customs Union as the rest of the EU member nations, which means right now there are no negative effects on supply chains or international trade. This means that Great Britain is still benefitting from the open movement of goods and labor without any tariffs or restrictions. Taking advantage of the lack of import and export tariffs is one factor that has helped the UK stay completive with the rest of the world.

Then there are the workers that have moved from another nation to the UK with the EU’s policies. It is uncertain if these people will be allowed to remain as they have before Brexit or if they will have to seek work status in a more traditional way. This has the potential to heavily impact employees and employers alike, putting many people’s futures in question.   

What Will Brexit Mean for Supply Chains?

For the smaller business and those supply chains that have a local presence, there will not be too many inconveniences to how they operate. It is believed that after Brexit that most of the EU regulations that target inner-nation trade will be overturned and new rules will need to be adopted. There will also be some discussion on the status of EU citizens that live and work in the UK.

During the period between March 2019 and January 2021, the UK and EU will have to come to an understanding on fair trade agreements to avoid disruptions to supply to both parties. If these deals can’t be sorted out the companies that channel through the UK-EU borders will have new obstacles that may impact the company’s entire outlook on shipping. There could potentially also be new regulations on warehouses/shipping centers in an EU country that is owned and operated by a company located in the UK.

The ramifications go beyond goods that originate in the UK, as British ports also serve as a midway point for goods headed both ways across the Atlantic. Shipping companies might have to learn and comply with several different sets of rules. This will add to costs across the board, and slow the process of international trade dramatically.  

An Uncertain Way Forward

With current trade deals and shipping rules in place for just under 2 years, the future of trade in Europe is up in the air. Many companies in both the EU and UK are strengthening ties with each other to do the best they can to prepare for the upcoming changes in regulations, but these are ultimately subject to any deals reached by the respective governing bodies. However, until progress can be made to settle the state of trade the entire world has to watch closely as the situation evolves daily.

This could look like a seemingly “apocalyptic” scenario for global supply chains, but it is reasonable to believe that even if the politics of the situation aren’t fully settled that the business side will get hammered out in plenty of time. It should also be noted that the UK would not have to create regulations from scratch, and could very easily conform to and trade under existing World Trade Organization guidelines. Once that is taken into consideration then it doesn’t appear as insurmountable a task for the UK to exit the EU Customs Union and remain competitive on the global market.