International Business in UK Post-Brexit
By Phil Simmonds, EC Electronics
No matter the size of your UK company or which sector you operate in, 2020 will undoubtedly have been a rollercoaster year.
After three and a half years of Brexit negotiations, the UK officially left the EU. However, there are still negotiations to be had, which will decide the future of trade between the UK and Europe and, indeed, international business.
The Brexit transition period ends at 11 pm on the 31st of December 2020 and will likely bring significant changes to logistics and supply chain operations. Throw a pandemic into the mix, and there is plenty of uncertainty for businesses both in the UK, across Europe and the rest of the world to circumnavigate.
Complicating exports and imports
The EU remains, by far, the UK’s largest trading partner, with over 150,000 UK-based companies doing business with Europe. These companies are likely to see the most significant disruption following the end of the transition period, and many will need to submit customs declarations, as well as safety and security filings, for the first time.
Put simply, if you trade goods with the EU, those goods will need to have import or export declarations covering their movement in and out of the UK from the 1st of January 2021. Additionally, if you are moving goods from Great Britain to Northern Ireland, you will require a movement declaration. These declarations on goods moving between the UK and EU will remain regardless of any free trade agreement that might be reached.
Understandably, many are concerned about the disruption this added red tape could bring to their business and operations. For example, UK manufacturers may see disruption in their supply chains post-Brexit, with imported electronic components experiencing import delays, which could have a knock-on effect on lead times for customers.
COVID-19 has further complicated the issue of imports and exports. Some businesses may want to consider operating a ‘just-in-time’ model — holding low product stocks and relying on regular imports for international trade to reduce warehouse costs. However, as a result of the pandemic, fewer goods are being exported and those that are, may face heavy quarantine procedures and excessive checks at the importing stage — leading to prolonged delays that could potentially disrupt this model.
Planning for added paperwork and taking steps to minimise these delays will be essential for businesses moving forward. Many UK-based customers may also choose to have their products delivered directly to their facilities or their end customers in the EU to reduce any disruption.
With the costs of exports and imports increasing, it is also reasonable to expect a price squeeze across the whole supply chain. Companies will have to do more for less to avoid passing on costs to end customers, who are currently just as reluctant to spend as their suppliers.
This decrease in spending could prove to be a barrier to international trade as lower demand limits production. As a result, many businesses in the UK will have to choose between expensive imports and potentially cheaper domestically produced goods. However, many components and raw materials will still have to be imported, meaning the domestic option will not necessarily be as cost-effective as it appears initially. An alternative solution could instead involve looking at nearshoring opportunities and different supplier routes.
Nearshoring could prove particularly beneficial for Europe-based SMEs. Many businesses are growing increasingly concerned about their products being manufactured in regions of the world where the most economical route to their markets is via a five-to-six-week boat journey. In comparison, nearshoring allows them to remain in a dynamic and competitive position when it comes to costs and manufacturing opportunities — crucial given the current pandemic situation.
At EC Electronics, operations are continuing to run smoothly despite all the external factors that are impacting international business at the moment.
Many UK manufacturers that currently ship to Europe will need a whole new way of doing business once the transition period ends. However, we have been handling operations across Europe and the UK since 2006, so we are well prepared for these challenges.
Our established European supply chain allows us to bypass any risks — with components arriving directly from EU suppliers to our Romanian factory, without border delays or costs, to ensure our customers see absolutely no disruption as a result of Brexit (or the pandemic). For our UK customers, our established and tested Brexit logistics routes back to the UK will also ensure uninterrupted supply.