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Key Risks to SME Supply Chains from a No Deal Brexit

Key Risks to SME Supply Chains from a No Deal Brexit

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I understand that everyone is now getting tired of hearing about Brexit (me too). No matter your viewpoint, everyone is hoping the powers that be would just get on with it.

This article is not meant to be a doom and gloom forecast with any political agenda or of any opinion either way, but my hope is that after reading this article small business managers will begin to consider potential risks posed to their business from the Brexit process.

With the current political situation regarding the scepticism around the negotiated deal, I feel it is important to highlight potential areas of risk all business managers should be reviewing, and preparing mitigation plans to help manage their supply chain effectively in a 'no deal' Brexit scenario.

It is important to understand the importance of Europe to the UK economy and how deeply embedded ties to Europe can be, it is generally held that all businesses in the UK trade with Europe in one form or another directly or through their supply chain.

First, a couple of Government statistics which you may have already seen:

  • 55% of products imported to the UK are from EU members
  • 49% of goods exported from the UK go to countries within the EU

Although these are very broad figures, they begin to give an insight into just how integrated UK and EU businesses may be. These also signpost the way to some of the potential risks all businesses need to be aware of.

According to research from the Federation of Small Businesses (FSB), only 14% of small businesses have started planning for a no deal Brexit. This is worrying as most large organisations have invested great time and resources in creating a Brexit risk assessments and mitigation plans.

Even if you don't trade directly with the EU, some of your suppliers most certainly will and you will indirectly be impacted through your supply chain.

There are five main risk areas every business should be currently investigating:

1. Product shortages

This has been widely reported and may be caused by uncertainty at EU/UK borders. Some large companies are beginning to stock pile critical inputs to their business in an effort to maintain short term production and customer supply. The Government has issued advice for critical infrastructure i.e. hospitals etc to stockpile important supplies to avoid shortages.

2. Increased Product and Transportation Costs

Trading with the EU following Brexit will bring tariffs in some form. The transportation of goods to and from the EU will also have an increase cost due to tariffs, border controls, currency fluctuations.

3. Increased Lead Times

With the increase paperwork and protocols relating to border control, it is expected that the lead time for goods transported to or from the EU will be subject to an increase.

4. Currency Fluctuations

Throughout the Brexit process the instability has caused dramatic fluctuations in the currency rate between Stirling and the Euro, the expectation is that until the Brexit process is complete this will continue.

5. Uncertainty of Supply

The overriding point, with the Brexit process,is the level of uncertainty it has instilled across the UK and Europe. Large companies on both sides of the channel are currently considering their development and possible relocation plans. There is no guarantee of any trade deals outside of Europe within the near to medium future and there is an immense amount of posturing from politicians and business leaders alike. All this only creates further instability with companies and markets fearing and planning for the worst case scenarios.

To help protect your business interests, through the uncertainty of Brexit and in the possible event of a 'no deal' scenario, it is important that all business managers are aware of all risks that directly or indirectly impact their business. Although it is relatively easy to understand the risks from direct trade with Europe, understanding how your supply chain interact with Europe is much more difficult and requires greater investigation.

To assist with this, SCB Procurement Solutions are offering an initial supply chain risk desktop analysis service. We will perform an analysis on up to 3 of your key critical suppliers and produce a report outlining how they interact with the EU and what preparations they have already made.

This service costs £500 and is designed to give you an insight into the potential risks posed by your current supply chain, helping you mitigate any possible harmful risks posed.

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