Brexit, and more specifically the likelihood of a no deal Brexit, will impact on the supply chain for innumerable companies.
The implementation of the Maastricht Treaty in 1992 marked a positive change for trading relations between the United Kingdom and the European Union. It enabled companies to trade freely unencumbered by customs checks, tariffs and the administrative burden previously associated with inter-European trade. The seamless trading relationship is about to change as a result of the UK’s decision to leave the European Union in March 2019. The referendum result and its consequences means that companies operating in both jurisdictions now need to consider their next steps to ensure that they need to take to ensure that they can continue to manufacture their products and to trade with minimal interruptions.
In our fourth Brexit whitepaper entitled ‘What’s Next?’ we published the results of our survey of 243 regulatory experts. At that time (end of Q1 2017) 27% of those surveyed said that their company had no plan in place to handle the issues that might emerge as a result of Brexit. It is logical to surmise that now (end of Q1 2018) that the figure would be smaller and that more companies would have carried out some form of scenario planning on the issue. Nevertheless, we are still aware of a cohort of companies that are adopting a ‘sit & wait’ approach to Brexit.
In an era of ‘known unknowns’ one thing (for now) is certain. The UK is leaving the customs union. As such, supply chains will be deeply impacted by this mostly political decision. Further to that, there is an expectation that in the fullness of time that regulatory standards will diverge adding to the complexity of the issues that life science and supply chain professionals will have to contend with in a post Brexit world.
Supply chain professionals should begin scenario planning for life after Brexit. Actual planning may be difficult as the nature and terms of the UK departure need to be negotiated. Therefore, specialists are best served by assessing the impact of Brexit on their businesses by looking at the various trading options that have been suggested by the main protagonists in this endeavour.
Put simply, Brexit has the capacity to wreak havoc on the life sciences supply chain. Business relationships with API manufacturers, finishing plants, warehousing/distribution centres and other elements stand to be impacted. Transactions within the supply chain will need to be analysed to consider the possibility of tariffs, additional taxes such as VAT and other customs duties. All of these elements need to be identified when identifying and dealing with suppliers.
Let’s look at the potential implications of Brexit on three distinct areas within the realm of supply chain: