Bitesize Brexit 2.0. Tips on what to do now: supply chains

Many supply chains are likely to be significantly impacted by Brexit. The Brexit transition period ends in a matter of weeks and, to date, no trade deal has been agreed. Is there anything that you can do now?

Yes, the uncertainty continues but—even so—there are things that you can do now to prepare yourself for the end of the Brexit transition period. With the UK due to leave the EU customs union at the end of the year, surveys have shown that one of the biggest things that is keeping businesspeople awake at night is the prospect of disruption to supply chains.

In this series of bite-size ‘Brexit countdown’ articles, we focus on the commercial implications of ‘Brexit 2.0’ in certain key areas and set out a high-level overview of the sort of things you should be thinking about with your teams and customers, and what you should be doing to get yourself Brexit-ready.

Last time, we looked at contractual performance. In this article we look at the impact on supply chains.

What sorts of things should you typically be thinking about?

For your supply chains, consider these key matters in particular:

• is there anything which may directly or indirectly impact or disrupt the supply chain?
• to what extent do you have visibility and control over supply chain risks?
• do you understand the differing proposed import and export controls? How do you intend to work with them?
• what is the likely impact of Brexit on, in particular:
  • ‘just in time’ deliveries?
  • levels of stock holding?
• have you considered what happens if a pipeline of key goods fails, perhaps because an item which was previously passed as safe and compliant under an EU regime falls outside the regime after Brexit?
• is there likely to be any increased costs due to any increased requirement to warehouse parts?
• is there likely to be any increased costs due to extended reporting requirements for rules of origin?
• have you considered the extent to which suppliers in the EU may cease to trade with UK companies if any processes in the supply chain become too complex, costly and time-consuming?
• is it likely that any of your UK suppliers are likely to relocate to other centres in the EU due to Brexit?
• to what extent are there single suppliers or small numbers of suppliers in any part of the supply chain?
• do you need to build any of the following into the supply chain:
  • additional capacity?
  • redundancy?
  • flexibility?
  • agility?
• what is the possibility of suppliers going insolvent?
• have you considered what happens with any closed protocol suppliers (which are usually associated with systems such as fire alarms, which can only be maintained by the supplier who manufactured and installed them). Spreading the risk for such contracts is much harder
• what is likely to happen to any suppliers which are reliant on EU grants and funding. Who is at risk if that funding is stopped or reduced?
• have you considered what happens if key personnel at a supplier are made redundant?

Of course, every business will need to consider its own particular circumstances based on factors such as, in particular:

• its location
• the nature of its goods and services
• the business, economic and regulatory environment in which it operates
• the location of its key customers and suppliers, and
• the make-up of its workforce.

There is no one-size-fits-all approach to the analysis you need to do but thinking about the commercial aspects above can help you decide what legal changes (if any) are necessary now and in the months to come.

At Shoosmiths, we have stayed close to Brexit developments. As always, we welcome any thoughts or comments from you and are ready to help you prepare for Brexit.

We are also producing briefings across all specialisms to keep you informed of legal changes anticipated in light of Brexit.

If you have any queries, do get in touch.

In the next article in this series, we’ll be looking at the impact of market conditions.