The Effect of Brexit on Global Supply Chains
The effects of Brexit are far reaching for a wide variety of industry sectors around the globe, and the logistics sector is by no means exempt. There are severe implications for supply chain, logistics and distribution sectors as a result of Brexit, both positive and negative.
In the short term, the consequential drop in the British pound sterling could make businesses more appealing; British goods become cheaper for buyers in other countries. A weaker pound isn’t wholly a bad thing and could encourage more spending from overseas and increased exports. Despite this, in the wake of the Brexit vote the shares of many logistics companies such as FedEx, UPS and XPO Logistics saw a decline. XPO Logistics in particular saw their shares drop sharply by 14.9%.
These drops in shares could just be an initial reaction to the historic outcome of the vote, and for the logistics industry, global supply chains may not actually be so greatly affected in the long run. The global supply chain is not just concentrated throughout Europe; there are growing and thriving markets in Asia, America and Australia that we can be maintained or developed. Through countries like Norway and Switzerland we have already seen that there is a possibility of access to EU markets, despite potential tariff changes in the wake of Brexit.
With no fixed decision or agreement between the EU and the UK, especially with regards to trade tariffs, it is impossible to know exactly how the supply chain throughout Europe and the world will be affected. For any business related to logistics it’s best to map out all possible risks and opportunities. An optimistic outlook would be that the best supply chains are built on more than just finance, developing strong relationships between clients and suppliers. If you provide high quality service with low risk, people are still going to be interested in doing business with you. You just might have to rethink your marketing campaign to cater for a new environment.
Brexit may also mean a lack of free movement between the EU and the UK. While this means that finding talent to employ within the sector may also become an issue, especially considering the logistics sector is already in need of more employees, there are also implications on the transport of goods. Tighter border controls and less predictable crossings are likely to provide issues. Delays and their associated costs, reductions in customer satisfaction and inventory financing costs are all key issues that need to be considered. It might be possible to develop a central hub in mainland Europe to store and supply goods from, but processes throughout the entire supply chain need to be adapted to maintain efficiency.
There is hope, for the logistics sector, that Brexit will have a minimal effect overall. It is in the best interests of both the EU and the UK to keep tariff restrictions to a minimum as to do otherwise would both adversely impact economic growth. Though the exact nature of changes might not be apparent for some time yet, existing supply chains are adaptable and may just need rebuilding to a new trade map. There are sure to be plenty of disruption and delays in the meanwhile, but this could be a perfect opportunity for logistics and supply chain experts to demonstrate their problem solving skills and invaluable contribution to the functioning of daily life.