Why you need a Brexit strategy
As Brexit creeps ever closer, it’s increasingly clear that many companies will face difficulties in their supply chain and organization, an increase in their exposure to risk plus damage to their bottom line. And that’s even with a soft Brexit and a good trade deal! So, with the real chance of a “no deal” Brexit looming, it’s even more vital to have a comprehensive strategy that helps you prepare for the worst while hoping for the best.
What do you do if your business relies on seamless cross-border trade to and from the UK? Wait and see what happens? Or take a guess and head off into the unknown? Either way, it probably seems a huge gamble.For many businesses, the risks and costs may still be potential but the uncertainty and even fear are real. Ian Howells, Senior Vice President of Honda Europe, recently spoke to the BBC and gave a stark warning of what would happen to his company in a worst-case scenario of a hard Brexit and had to fall back on World Trade Organization tariffs. The extra customs duties would add “tens of millions of pounds” to the cost of shipping cars to Europe – and the same again to the cost of bringing components into the UK.
Customs duties are the tip of the iceberg
But perhaps the most threatening aspect of Brexit are the potential non-tariff barriers. As Mr. Howells said, “In terms of administration, we’d probably be looking at something like sixty odd thousand additional bits of documentation we would have to provide to get products to and from Europe.” For a business that stores an hour’s worth of components for its production line and relies on 350 truckloads of parts delivered from Europe each day, the extra friction and hassle will not only disrupt the supply chain but also harm output and even their competitiveness getting their cars out to the market.
Even if your business and supply chain aren’t as complex as a car manufacturer’s, all EU companies trading with UK – and the other way around – need to analyse the additional costs and risks in the different Brexit scenarios. Not just in relation to potential new tariffs but also non-tariff barriers. For instance, do you know how much Brexit will add in cost and time to your existing business model? What supply chain or organizational changes should you make to stay ahead of the competition – or even just keep up with them? How do you avoid contractual breaches and keep delivering the same business experience to your customers?
Get ahead of the game
As you can see, these aren’t just customs or even supply chain uncertainties. These are questions that strike at the very heart of your business and its future. So, ultimately the big question might be: Will your company be ready for the challenge of Brexit and rise to it – or will you play catch up and risk being left behind? The good news is that by being pro-active now and developing a comprehensive Brexit strategy, you’ll not only minimize the risks but you’ll be able to reap the rewards your competitors are in no position to take.
To get you started, here’s an outline of what you need to cover. It’s also a structure we follow ourselves when our customers come to us for expert advice and support:
1. Understand how Brexit impacts your business. You’ll need to get a clear picture of what Brexit can mean for everything from your P/L statement and lead times in your supply chain to identifying gaps in the knowledge and capacity of your organization.
2. Explore your options to reduce risks and boost potential value. Once you’ve mapped the impact throughout your business, you can draw up a list of options in the same areas.
3. Decide your strategic actions. With the clearest picture of the impact and your options, you can use the P/L consequences to define and prioritize the actions that will mean the most to you and your company. Not only that, but you’ll also be set up to monitor and fine-tune your performance after Brexit.
As you prepare for Brexit, we want to wish you good luck but we hope you won’t rely on it. At the very least, we believe a solid strategy will deliver results by reducing the risk and uncertainty – and helping you take control and move forward with confidence.
If you have any questions about Brexit or uncertainty about how your company will cope, don’t hesitate to contact us at KGH. And if you need actions not words, we can also provide a Brexit strategy service that helps accelerate or even start up your preparations. E-mail email@example.com or call Björn Höglund, Trade and Customs Consulting on +46 708 401301.