TIME TO MITIGATE THE RISK OF A ‘NO-DEAL’ BREXIT?

 What happens on 29th March 2019 when the UK leaves the European Union is pretty much anyone’s guess, and it is this huge uncertainty over what form of Brexit we may experience at our borders that is putting the UK supply chain at great risk.

As the months tick by there is mounting danger that a ‘no deal’ will result in turmoil at our ports, with long queues of lorries parked-up at Dover and Calais, creating days of delays for freight in transit and causing shortages in the supply of vital goods and components to just-in-time manufacturing lines, retail stores, engineering works, hospitals and pharmacies.

To give some scale to the issue: according to figures released by the Freight Transport Association (FTA), 48.8 per cent of the goods exported by the UK in 2017 went to the EU whilst 54.6 per cent of the goods imported to the UK came from the EU. That amounts to £136.4 billion of goods passing from the UK to EU members and £208.6 billion of imports flowing from the EU to our shores in 2017.

If the UK leaves the single market then customs declarations for all goods crossing the EU border will be required. HM Revenue & Customs estimates that the number of customs declarations will rise from 55 million to 255 million annually, making it a huge challenge for systems to be ready by 2019. Even with a transition deal in place it will be vital that customs declarations are not required over the transition period.

With increased bureaucracy becoming more likely, supply chains are facing the prospect of slowing significantly, and to offset the risks of shortages in supply, inventory levels may well need to rise – at least for the short-term.

A number of businesses are starting to make contingency plans. Rolls-Royce are reported to be looking at the possibility of holding larger stocks of parts in Q4 if greater clarity is not forthcoming. And Airbus recently said it might have to stock up on parts it needs to build wings at its UK plants to avoid the risk of delays to deliveries.

However, a recent survey conducted by the CBI finds that only 12% of businesses surveyed have put together a contingency plan for a ‘no deal’ scenario. Some 49% said they haven’t yet, but plan to.

Why are so many enterprises ignoring the issue, hoping that a deal will eventually be struck with the EU at the eleventh hour?  It can only be the level of uncertainty and lack of clear direction that is holding preparations back but as we get closer to March 2019 it’s time UK businesses started to seriously consider their options.

Foreign Secretary, Jeremy Hunt, is reported to have warned recently that there is a “very real risk” of an accidental no-deal Brexit. Time is running out and the risk of supply chain failure is rising.

Businesses reappraising their levels of stock and/or deployment of inventory to cover such risks may find themselves requiring either extra warehouse space or facilities in new locations. But with the uncertainty surrounding the exact circumstances of Brexit, and the possible short-term nature of any disruptions, careful planning and flexible arrangements on leases and services are going to be vital in order to balance exposure to risk and unnecessary cost. 

The challenge is, demand in the autumn for extra storage facilities and services could be daunting given the scale of trade between the UK and EU. So, planning for such contingencies should start now if businesses are to find the most cost-effective and flexible arrangements. How many companies were caught unprepared when GDPR came in? A much less significant deadline, perhaps, but it shows how companies can be caught out through lack of planning.

Creating a plan that reduces the risk of supply chain failure on the 29th March next year should be open to options that go beyond the traditional scope of estate agents and 3PLs. There is a third way – one that offers flexibility, proximity and capacity at minimum risk and cost. 

Businesses across the country have under-utilised warehouse capacity and a great many are searching for ways to put those resources to work. The opportunity for collaboration is far and wide. Many warehouse users have excellent facilities, cutting-edge IT, and a highly motivated workforce.

Working with Bis Henderson Space, and its wide portfolio of properties and competitively priced 3PL operations, there is a far higher likelihood of achieving a flexible deal – perhaps just for 6 – 12 or 18 months – at a well-suited location.

In addition, the business works with clients to offer a whole solution, from helping to arrange transport and courier options, to linking with Bis Henderson Consulting for network planning and step-by-step change programmes.

How to ensure supply chains keep flowing will become the overriding preoccupation for businesses this autumn. Planning now can help avoid the shortcomings of an 11th hour rush for storage capacity and services.

Steve Purvis is Operations Director at Bis Henderson Space www.bis-hendersonspace.com

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