In January 2018 the Chamber along with commercial law firm, Square One Law commenced a series of private consultations with manufacturing businesses from the North East which are operating within global supply chains. The aim of the research was to assess how “Brexit” ready businesses were, particularly those businesses which imported or exported goods, understand what form these preparations were taking and assess whether there were any areas had been inadvertently overlooked and could therefore be an area of risk. At the outset it was anticipated that, in line with most commissioned research, that there would be a sliding scale of readiness which in turn would lead to recommendations of which areas of preparation required refinement. During the process meetings, a closed roundtable session and a half day conference were held and acted as a consultation mechanism with over 150 business leaders operating within the North East.
However, the feedback was much more stark and, to an extent, quite shocking. Businesses fed back that preparation for Brexit was polarised and effectively took the form of two options: no preparation whatsoever; or preparation to relocate to mainland Europe.
This is now leading to pressures on supply chains where feedback indicated that Original Equipment Manufacturers (OEMs) and first tier suppliers are expecting the supply chain to carry up to 25% more stock to ensure that just-in-time assembly models can be maintained. This in turn will lead to cash flow pressures and logistics and storage problems. The picture is therefore still one of uncertainty. We have re-evaluated the aim of the research with the emphasis now completely on persuading businesses to prepare contingency plans, as well as lobbying government to understand the scale of the task if current uncertainty levels continue. At the minute the only “fact” we are certain about is that the UK will leave the European Union on 29 March 2019. This may take several forms:
• We may leave the Single Market (a soft Brexit);
• There may be a transition period (a soft Brexit);
• We may leave the Customs Union (a medium Brexit);
• We could default to a WTO trade position (a hard
In the event of any of these scenarios (with the exception of a transition period) Brexit will mean many of our members will be faced for the first time with hard borders in Europe. This would result in more administration, border controls, new import/export rules and the possibility of needing visas to travel. At present the technology to allow for frictionless trade over a hard border does not exist and will not exist by 2020.
Who will Brexit affect?
We are certain that the following groups will be affected, whichever Brexit outcome we achieve:
• Most North East businesses
• Service sector
• All exporters
• All importers
• Employers of EU nationals
• UK workers in or travelling to the EU.
From the consultation conversations undertaken Neil Warwick, Head of EU & competition law at Square One Law has been advising all North East businesses to implement their own Brexit plan, which should include the following:
• Comprehensively assess your trading terms
• A review of your supply chain
• Registration of your business as an Authorised
Economic Operator if you export
• Review all employees travelling to and from the EU.
A new language?
If you import goods or export goods, trading will become more complex, not just through the new jargon that will be used frequently. If you are not familiar with the following terms or have not addressed their specific relevance to your business, you will need to familiarise yourself with them and include them in your Brexit contingency plan:
• Classification Codes
• Rules of Origin
• Authorised Economic Operator
• Freight Forwarder
To help North East businesses understand the practical implications Brexit will have on their operations from 29 March 2019, we have developed a Brexit business flowchart (available at: https://www.neechamber.co.uk/updates/brexit-ready) which demonstrates the complexity of exporting a single good with one classification code to the EU in the event there is no Customs Union arrangements. This report summarises some of the key findings in the four areas of concern highlighted by business:
• Access to Markets
• Access to Labour
• Regulatory Issues
• Access to Finance
Neil Warwick OBE, EU & Competition Lawyer
Commercial law firm Square One Law