UK Businesses Adapt: Surviving the Post-Brexit Landscape
Britain's departure from the European Union in January 2020 has led to significant changes in the economic landscape of the United Kingdom (UK). Since the exit, various economic sectors, particularly those involving supply chains and value chains, have experienced notable disruptions.
When the UK left the EU, it also left the European Single Market and Customs Union, which had previously facilitated seamless trade and supply chain integration across member states. The transition required new trade agreements, with the EU-UK Trade and Cooperation Agreement being announced on December 24, 2020. This agreement allowed goods to move between the UK and EU markets without tariffs or quotas but introduced customs checks and regulatory barriers that were not present before.
Impact on Supply Chains
The introduction of customs declarations and the need for compliance with new regulatory standards have increased the complexity of supply chains. UK businesses now have to navigate customs-export declarations for shipping goods to the EU, adding both time and cost to the process. These declarations, whose fees have tripled since 2016, have particularly impacted small firms that are less able to absorb additional costs.[1]
Additionally, there has been a notable reduction in the availability of EU-based logistics and transportation services due to the new restrictions on the movement of goods and people. This reduction has caused delays and increased transportation costs, affecting the timely delivery of goods and raw materials. The Office for National Statistics has reported a decrease in both goods and services flow since Brexit, indicating the challenges businesses face in maintaining efficient supply chains.
Value Chain Adjustments
Beyond supply chain disruptions, the broader value chains have also been affected. The shift in trade dynamics has led UK companies to reassess their value chain strategies, considering factors such as the cost of production, sourcing of materials, and market access. Many businesses have had to explore alternative suppliers outside the EU or consider reshoring some aspects of production to mitigate the increased costs and complexities associated with EU trade.
The labor market, another critical component of value chains, has also felt the impact. Restrictions on the free movement of workers from the EU have led to labor shortages in key industries such as agriculture, manufacturing, and services. This shortage has forced companies to adapt by either seeking labor from other sources or investing in automation and other efficiency measures to compensate for the reduced workforce availability.
Economic Indicators and Ongoing Changes
Since Brexit, economic indicators have shown mixed results for the UK. The British economy has experienced slower growth compared to the EU, with inflation rates higher than in the Eurozone. According to reports, Brexit is responsible for a significant portion of the food-related inflation in the UK, impacting both consumers and businesses dependent on imported goods. The delay in implementing health and safety checks on imported food products has also raised concerns about long-term sustainability and food safety.[2]
Looking ahead, UK businesses and policymakers continue to adapt to the post-Brexit environment. There is ongoing work to streamline processes, negotiate new trade agreements, and find ways to enhance supply chain resilience. The full impact of these changes will take time to materialize, but it is clear that Brexit has fundamentally reduced GDP in the UK.
Conclusion and Key Takeaways
The post-Brexit landscape has presented a series of challenges and opportunities for the UK, particularly in the realms of supply chains and value chains. The departure from the European Union has necessitated significant adjustments, from navigating new regulatory frameworks to coping with increased costs and logistical complexities.
Key Takeaways: