The pandemic has wrought so much havoc that it's easy to forget about Brexit, especially for Europe. For British manufacturers, however, some dour realities are beginning to sink in.
Official figures show that UK exports to the EU were down by a record-breaking 40.7% in January 2021, amid the border chaos. Imports weren't much better, having dropped by 28.8%—also a record decline. At the time, the government brushed this off as “teething problems”.
What can mid-market corporates do to avoid falling off this cliff edge?
1/ Manage supply chain stress more aggressively
Companies continue to struggle. In March 2021, UK manufacturers reported that vendor lead times had lengthened to the second-largest extent in the history of the closely watched Purchasing Managers Index. Supply chain managers are having to work overtime amid raw material shortages and post-Brexit issues, despite the eleventh-hour tariff-free agreement made in December. Forward planning is now paramount to avoid supply chain delays or issues.
2/ Get a handle on costs
Costs are also spiralling—rising freight fees and trade disruptions are putting additional pressure on profits. The price inflation of input costs in the UK accelerated to a more than four-year high in March. This will have to be passed down the supply chain if businesses are to maintain their earnings margins, which means CFOs and treasury chiefs have their work cut out for them.
3/ If all else fails, consider a European offshoot
For UK exporters with high euro revenue exposure and suffocated by approvals, customs declarations and other red tape, there has been another option. The government's own Department for International Trade has unofficially advised companies to establish operations on the continent (while officially advising that this is not official advice).
By setting up fulfilment centres in the likes of The Netherlands and France, and shipping over large consignments, direct-to-consumer companies have been able to alleviate cross-border delays, paperwork, higher charges and VAT complications that have hit their customers.
