Elections across Europe are shaping the terms of negotiations that will lead to Britain’s Exit from the EU, but companies are already preparing to server supply chain ties between the UK and the EU to avoid Brexit Tariffs.
Emmanuel Macron’s victory over Marine Le Pen means that France now has a president who is regarded as ardently pro-Europe and who can be expected to demand a hard line in Brexit negotiations.
Later this month, it is widely expected that Theresa May will increase her majority in the UK parliament, which, if it happens, will strengthen her hand against both Brexit hardliners in her party and those who would like to see more conciliatory approach.
Perhaps even more significant will be the German federal elections which will take place on 24th September. Germany’s attitude will be critical – after all it is the biggest contributor to the EU’s budget: €24 billion compared to the UK’s €18bn and Frances €19bn.
The impact of all this on businesses is already being felt, as a survey of 2,111 supply chain managers by the chartered institute of procurement & supply has revealed. It found that almost one third of UK businesses that use EU suppliers are looking for British replacements, while almost half of European businesses expect to reduce their use of UK suppliers. 36% of UK businesses also plan to respond to Brexit by beating down their supplier prices.
Some 65% of UK businesses have seen their supply chains become more expensive as a result of the weaker pound, with 29% re-negotiating some contracts as a result.
When asked about major challenges facing UK negotiators in the trade talks, 39% said the UK has a weak negotiating position and 36% believe there is a lack of time, but 33% believe that there is a shortage of supply chain expertise. And knowledge for the UK to draw upon.
No wonder CIPS chief executive Gerry Walsh was able to say “The separation of the UK from Europe is already well underway even before formal negotiations have begun”. Walsh is clear that Brexit is likely to bring considerable costs for businesses in the UK and Europe; these costs are then going to be passes on to small suppliers and eventually consumers.
What the CIPS survey does not attempt to do is quantify the cost of all this uncertainty, and that is likely to be considerable.
Even assuming that the negotiations go as well as they possibly could, there will still be delay to decision making, uncertainty about the correct strategy and risk involved in getting it wrong.
Managing those risks is only going to get more challenging as the negotiations progress.
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