The Brexit is now definitive and is planned to be executed on 29 March 2019, shortly a year from now. As it is still unsure whether it will be a ‘soft’ or a ‘hard’ Brexit, it is difficult to make clear preparations for your company (unique in its own way). Should you continue your rental agreement or should you invest (more) in local storage in the EU? Will the consequences really be that big or will they be minor for your specific company?
Unfortunately, there are no perfect answers for those questions. It is only sure that the Brexit will come, but not in what way or how heavy it will be. In this article we will discuss the view of experts and give you advice on what you can do to prepare for it.
The meaning of a ‘soft’ and ‘hard’ Brexit
We will first explain the meanings of the terms ‘soft’ and ‘hard’ Brexit since they are often used differently, understandably causing confusion.
- Soft Brexit: a situation in which the UK lets go of its negotiating position and, for example, strives for a customs union with the EU (just like Turkey) or stays within the internal market (like Norway). Trade will then be a little less flexible than it is today.
- Hard Brexit: looking at what the UK has indicated, there is actually always a hard Brexit. The UK wants to step out of the internal market and the customs union. At the moment this means that you will always have to deal with customs procedures and import tariffs again in the future. Besides this there will be additional trade barriers.
In case of a ‘very hard’ Brexit, often referred to as the ‘cliff edge scenario’, there is no agreement and the WTO rules apply. This means that you will also have to deal with customs tariffs at the border again.
What do experts say about the Brexit?
According to René Buck (Buck Consultants), it is wise to prepare for a hard Brexit. He gives an example in which one of his customers has to decide whether to continue with the rental agreement of their warehouse for another five years. One-third of their market is in the UK, two-third of their market is in the EU. When they face a hard Brexit, there will be a big risk that they cannot meet the delivery times in the EU. Measures like border controls and the necessary paperwork will consume a lot of time. They are choosing the safest option: moving to a smaller DC in the UK and opening a new hub in the EU. It might be unnecessary after all (in case of a ‘soft’ Brexit), but since there is still no clear view on what is going to happen, a choice has to be made at one moment.
Erwin van Aken, another expert that was present at the ‘Sessie Brexit’ event, shares the opinion that it is of big importance to aim at a good preparation. Since there is no certainty at all, preparing for the worst case scenario is the only right thing to do.
These opinions are supported by the warning the Dutch government wants to make clear to businesses: be prepared.
The preparations for your company: a few tips
Below are a few tips to prepare your company.
• Scan your business globally
During the NBCC Brexit Forum Event, an event that we attended, our Minister Sigrid Kaag launched the Brexit Impact Scan. It is a scan (in Dutch) for business located in the Netherlands, helping them to discover the unsuspected consequences of the Brexit, extensively described in this report of KPMG.
• Make someone at your company responsible for Brexit preparations or set up a Brexit project team
By giving the specific task of mapping the consequences for your business, it will be easier to make a decision regarding measures. Heineken, for example, wisely decided that there is no time to waste. They have set up a cross-functional Brexit taskforce, capturing all the elements of their business (financial assessments, logistical challenges, etcetera) that may possible be impacted by the most likely Brexit scenarios (good or bad). This was made clear in the speech of Jean-François van Boxmeer (the CEO of Heineken) at the NBCC Brexit Forum Event.
• Review your product or service portfolio
A possible decline of the British economy might affect the demand for your products. Import and export will become more expensive, possibly decreasing the popularity of your products. This will especially be the case when the UK is a big targetable market for your business.
• Find solutions for your logistics in, to or from the UK
If you have any logistics involved in or around the UK, it is best to find a solution for the problems you will face in this process. For example when you ship fresh products to the UK, like Bioderij does with their Dutch Mini Pancakes. The results of the Brexit Impact Scan were unexpected and made Jan Boers (CEO of Bioderij) decide to look at the possible solutions.
Conclusion: waiting too long can be fatal
It is difficult to decide and conclude which measures you should take to be fully prepared. That also mainly depends on the activities of your company and which market you approach the most. Future plans also matter in this perspective. From there on it is mostly a decision based on the cost of investments.
Luckily there are handy tools and experts that can help and advice you. We can help out by giving you advice regarding the storage of your stock and by giving an overview of the costs when distributing through the EU from a local DC. You can send us a message by e-mail or request a quote directly.
Don’t wait too long with the preparations: the Brexit and its consequences are closer than they might seem.