In this article, we examine how Brexit will impact the supply chain.
Almost four and a half years since Britain narrowly voted to leave the European Union, and with just days to spare before the temporary transition period between them expired, on 24 December 2020 the white smoke finally rose – Britain and the EU agreed the deal which will govern how they will work, live and trade with one another from 1 January 2021 onwards.
Businesses hoping that the Trade and Co-operation Agreement (the Brexit Deal) would act as a definitive guide as to how the British / EU trading relationship will look going forward will be disappointed. The agreement leaves a number of key areas open to further negotiation, including on harmonisation of data protection and financial service regimes. That said, the Brexit Deal does at least ensure that trade between the UK and EU will not be subject, routinely, to tariffs or quotas as would otherwise have been the case in a ‘no deal’ scenario.
Businesses engaged in trade with the EU or with supply chains crossing UK borders will be especially concerned with the following elements of the deal:
Trade in goods
Although the Brexit Deal ensures that most goods won’t face new tariffs or quotas, there will still be an array of new regulatory hurdles for exporters to navigate, all of which will make it more burdensome to trade into Europe.
While manufacturers have welcomed the avoidance of tariffs (which would have eaten into profit margins), it is clear that the loss of the assumption of conformity of standards will add to costs. The prospect of manufactured goods needing to be tested or certified to meet both British and EU standards is a real concern. As no mutual recognition agreement has been reached, Britain’s regulatory bodies won’t be able to certify products for sale in the EU, creating a potentially significant barrier to trade.
Those involved in supply chains which straddle Britain and the EU must also be aware that all imports shall now be subject to customs formalities at the border, including additional safety checks and declarations. This will inevitably lead to delays across supply chains as businesses get used to the new procedures at points of entry. However, some comfort may be taken from Britain’s decision to take a ‘light-touch’ to customs checks for a temporary period and from the commitments made by each side to find bespoke solutions to facilitate the import and export of products including automotive, pharmaceutical and chemical products.
It is worth noting that the Brexit Deal leaves Northern Ireland in the EU’s single market for goods and, accordingly, EU customs rules will now be enforced at Northern Irish ports.
Transport
Away from the points of entry, hauliers will be pleased to note that both sides have committed to “good and efficient management of visa and border arrangements for road hauliers” and to “appropriately facilitate the entry and stay of” truckers. They have also recognised the validity of each others’ licences and permits and included “full transit rights” in the agreement, allowing drivers to cross multiple countries in order to deliver goods.
Similarly, shipping companies and port operators will be pleased to note that the Brexit Deal’s provisions relating to maritime services are in line with other “free trade agreements” that the EU has reached with other third-party countries. They guarantee open and reciprocal access to the other's ports and ancillary port services such as pilotage.
Business travel and working arrangements
For businesses whose workers are required to move between Britain and the EU, the takeaway message is that Britain can no longer treat the EU as being akin to a domestic market. Business travellers will be able to enter the EU for up to 90 days for ‘meet and greet’ activities such as attending meetings or conferences but, as a rule of thumb, if a worker is delivering a service in the EU (for example auditing accounts or providing consultancy services), this will require a work visa and in many ‘regulated’ sectors will necessitate becoming recognised as a local professional too. Please visit the Business Immigration section of our website to find out how Brexit is affecting business travel and recruitment.
What next?
Whilst it is not the definitive free trade agreement that many had hoped for back in 2016, the Brexit Deal does at least provide UK businesses with a clear framework as to how the British / EU trading relationship will look going forward. This will enable businesses to focus on minimising the disruption to trade in a ‘post-Brexit’ world.
If you wish to discuss the impact of these issues on your business, please contact our Manufacturing and Supply Chain Team.
