If no-deal happens, the UK will go from being a member of one of the world’s largest single markets and customs unions to being a global outsider, quite literally overnight. The impact on all businesses across the UK could be dramatic. Companies in the manufacturing sector which rely upon just-in-time supply chains, and an international base of both suppliers and customers for their survival can expect to be heavily impacted.
However, since the UK joined the EEC (as it was then, now the EU) in 1973, the nature of our industry has changed. Rather than South Wales, Shropshire, and the North-East, the raw materials now arrive just in time from suppliers across the EU, and around the world. Any interruption to this just in time supply chain would have an inevitable, and costly, impact on business.
Unfortunately, it is difficult to see how an interruption to vital trans-European and global supply chains can be avoided.
The impact of this change cannot be overestimated since it will bring about the inevitable reintroduction of customs checks, import duties, and tariffs for all goods travelling from Europe into the UK. Not only will compliance with new – as yet unknown – procedures and bureaucracy impose additional financial and regulatory burdens, the uncertainty of additional transport times for goods crossing borders has the potential to render the concept of just-in-time supply an impossibility.
For manufacturers who export within the EU – or even to other countries with which the UK has a trade agreement as a member of the EU – there will be two options: pay the tariffs on behalf of customers and take a significant hit to their finances; or pass the costs on, see order numbers drop, and take a significant hit to their finances. There are companies across the Midlands region, and throughout the UK, already operating on tight margins for which this issue alone could mean that they can no longer continue to trade.
Worst of all, these impacts are not just limited to a no-deal scenario. Even if Theresa May’s previous EU deal can be passed through Parliament at the last minute by Boris Johnson, with perhaps amendments to the Irish Backstop, that will only buy more time to negotiate the terms of a future relationship with the EU.
Subcon Laser www.subconlaser.co.uk
This article was previously published in November 2019. Amendments have been made to reflect the current political status quo.