- One in ten UK exporters could have contracts cancelled if there are delays at the border
- One in five EU businesses will expect a discount from UK suppliers if border delays persist for just one day
- Just 40% of UK businesses would be able to export to the EU in the event of a no deal as a result of EU customs requirements
A delay of just one day at the UK/EU border could lead to a significant bill for British exporters in late delivery discounts and lost contracts, according to a survey of supply chain managers from the Chartered Institute of Procurement & Supply (CIPS).
The warning from European supply chain managers comes as the UK enters a crunch week for Brexit, with the prospect of border complications looming large. While UK businesses have been slow to prepare for a no-deal scenario, EU businesses have been preparing to push costs down to their British partners.
A 24-hour delay at the border would see 20% of EU businesses push their UK suppliers for a discount on their order while 11% of UK exporters would expect to have their contract cancelled outright by their clients in the event of delays. A quarter of European businesses, meanwhile, would withhold payment until after goods arrive, posing potential cash flow challenges.
If that delay grows to 2-3 weeks, 60% of EU businesses would leave their UK suppliers in the lurch, switching to back up suppliers based elsewhere. Worryingly for consumers, considerably fewer (44%) UK businesses would be able to switch to an alternative supplier if there was a similar delay getting goods into the country. The uncertainty has already proved too much for some of the UK’s European business partners, 38% of whom have switched suppliers as a result of Brexit, up dramatically from 18% in October 2018.
The findings come from a survey of 1,749 UK and EU-based supply chain managers, the professionals responsible for navigating customs, negotiating with suppliers around the world and keeping supply chains moving.
A no-deal, meanwhile, would lead to thousands of British exporters being turned away at the UK/EU border because they lack the expertise, data or technology to comply with the relevant EU customs rules. Just 40% of UK supply chain managers say they would be able to comply with four* of the EU’s customs requirements, leaving them unable to trade with the EU if the UK left without a deal later this month.
While border complications seem likely, this has not been enough to put off all UK businesses from exporting to the EU. The survey found that 39% of UK businesses said they will continue exporting to the EU after Brexit regardless of possible delays and costs, signalling that British exporters are determined to sell their goods to the continent despite short term risks.
John Glen, Economist at the Chartered Institute of Procurement & Supply (CIPS), said:
“The financial cost of Brexit indecision will not be paid in Whitehall, but by Britain’s businesses. Britain’s supply chains are so finely balanced, that even a temporary delay at the border after March 29th will see UK businesses paid later and paid less for their goods. These costs, combined with a lack of investment, will likely reduce the number of exports coming out of the UK and result in a reduction of the UK’s competitiveness on the international stage.
“If the UK does stumble out of the EU without a deal next month, the majority of British businesses would not even be able to file the right paper work to get goods across the border. Whatever happens in the coming days, Britain must still invest in the skills, relationships and technology to take its new place in Europe and beyond.”
*The survey asked respondents if they could: apply for an EORI number; ensure they can complete each data field in the declaration; agree responsibilities with their customs agent and logistics provider; and identify software for submitting documents if they do not use a customs agent.
Notes to Editors:
About the Chartered Institute of Procurement & Supply:
The Chartered Institute of Procurement & Supply (CIPS) is the leading international body representing purchasing and supply management professionals. It is the worldwide centre of excellence on purchasing and supply management issues. CIPS has a global community of 200,000 in 150 different countries, including senior business people, high-ranking civil servants and leading academics. The activities of procurement and supply chain professionals have a major impact on the profitability and efficiency of all types of organisations. CIPS offers corporate solutions packages to improve business profitability. www.cips.org, @CIPSnews.
About the survey
These findings were drawn from a survey of 1,749 supply chain managers from the UK and EU. The survey ran from 6th February to 22nd February 2019. There were 1,602 UK respondents and 140 EU respondents involved in the survey.
The previous Brexit reports over the last two years are available on the CIPS website.