As Brexit brings on a wave of uncertainty and disruption for UK businesses, procurement departments are on the front line. In “How Brexit will impact UK procurement”, The Raconteur discusses the consequences, as well as steps businesses can take to minimize damage to their supply chains. Colin Sharp, SVP EMEA of C2FO, shares his insight on Brexit and gives advice for UK businesses.
Currently, only a minority of companies are considering a variety of Brexit outcomes. Most businesses are still waiting to see what happens, in hopes that nothing will change. However, industry experts encourage businesses to plan now and prepare for various outcomes.
Consequences include changes in contract terms, identity of suppliers and the possibility of trade tariffs. A recent study found that almost half of European businesses with UK suppliers are finding replacements in the EU or are trying to lower supplier prices. Such activities could potentially create a dangerous cycle throughout the supply chain.
In efforts to prepare for Brexit, companies are seeking highly qualified procurement professionals to make sure any changes have limited impact.
Brexit will not only impact the UK and EU countries. “Every supply chain is international”, says David Lowe, partner at Gowling WLG. Brexit will surely impact international trade, regulations and tariffs. On the other hand, if the UK will no longer be tied to EU trade regulations, UK businesses will be able to do deals in Asia or the US. This opens up a lot of room for business opportunities and expansion.
“If the UK leaves the single market, but stays in the customs union then changes will be moderate,” Lowe adds. “But harder Brexit will potentially have much more significant impacts.”
Aside from how severe Brexit will be, another uncertainty is when the changes will take place. Some believe it will happen as soon as 2019, others say it will take longer than that.
Colin Sharp of C2FO, says businesses will have to plan in advance for various Brexit outcomes and have to conduct supplier risk assessments more often. “By building supply chain redundancy and flexibility, as well as defining a portfolio of real options in advance, these teams will almost certainly mitigate potential disruptions”, says Sharp. He also advises that businesses to evaluate what effect replacing a supplier based on significance and location, would have on the business.