Two weeks have passed since the United Kingdom (UK) announced the result of the Brexit (British Exit) referendum was to leave the European Union (EU). 52% of voters choose to leave, creating a new discussion about politics, international trade, and economics.
According to Logistics Manager, in a survery of 320 UK business people , 52.2% agreed that the Brexit result will have some kind of impact on their business. The main business concerns in business were economic stability, currency value, international trade deals with Europe, and the possible reduction in migrant workers
The New York Times Logistics Report argued that logistics companies may experience the Brexit result in two ways: the first one is the potential cutting into the movement of goods, but the second is the potential rising demand for services to help retailers and manufacturers navigate changing relations and trade rules.
“There clearly is going to be a period of transition here where everyone is trying to figure out exactly how Brexit will take place. But it’s not like the U.K. will stop trading with the EU and the U.S. or anyone else,” said Andrew Clarke, chief financial officer at Minneapolis-based C.H. Robinson to the New York Times publication.
Many companies built their head offices in the UK as a way to get access to EU markets, butt now, they’ve lost their gateway. They will need a new plan.
The business world is forecasting how Brexit will affect the global economy. Shortly after the Brexit vote announcement, The Wall Street Journal published an article about how this political move will influence the European supply chain. Article authors Paul Page, Robbie Whelan, and Laura Stevens interviewed shipping and logistics operators to uncover a potential two-pronged, short-term effect of Brexit, creating the 5 key concerns of Brexit.
- New duties, taxes, and restrictions in the international trade:
Once the UK secedes from the EU, products entering and leaving the UK might be subject to duties and other taxes along their routes from manufacturers to end customers. What was once a simple shipping process to nations across the EU will be complicated as UK businesses might face new restrictions before they can sell their goods in other countries.
- The establishment of new distribution channel strategies
The authors note that retailers both inside and outside the UK will have to rebuild their distribution channels to match the new trade map. According to Mark White (Chief commercial officer at SEKO Logistics Worldwide) some of the company’s customers are already considering moving their physical stock out of the UK and into Holland, Germany, and other EU countries—especially if a large portion of their sales happen on the continent—to avoid the new taxes and complications.
- The new reality for the UK economy and the potential of new players in the market
One positive economic point is that the Brexit vote could give UK businesses a short-term boost because of the weakened pound, considering that Britain’s currency dropped 11 percent following the Brexit vote and has traded as low as $1.32, making British goods cheaper for buyers in other countries, according to Lila Snyder (President for global e-commerce at Stamford-Connecticut based international shipping provider Pitney Bowes).
But as the pound took a hit last week, so did the stocks of multiple shipping and logistics companies. Shares of XPO Logistics dropped 14.9 percent, FedEx fell 3.8 percent, and United Parcel Service declined 2.2 percent in New York trading. In the European markets, shares of A. P. Moller-Maersk declined 3.1 percent, and shares of logistics provider DSV fell 5.2 percent
- The rearrangement of UK main partners: China trade.
Forbes cautions that the financial effects of Brexit will continue. A total of $3 trillion dollars was wiped from stock markets across the globe following the Brexit vote announcement.
Corporate buyers in China are reducing their orders as China’s June Purchasing Managers’ Index dropped to a four-month low. Although the situation will not likely cause a global recession, it will dampen the growth of the global economy..
- The Brexit vote is not legally binding yet.
Brexit vote is not legally binding yet, as the British Parliament still has to pass the laws that will allow the UK to withdraw from the EU. BBC News points out that the UK has to invoke Article 50 of the Lisbon Treaty to set in motion the legal withdrawal process, which could take up to two years. till, it is best to look ahead and consider now the possible risks and implications for future supply chains.
Reference:
Abe Eshkenazi, CSCP, CPA, CAE. APICS is the premier professional association for supply chain management blog post. Forecasting Brexit’s logistics implications. Available at http://www.apics.org/