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Analysis

Supply chain reaction to Brexit will see jobs leave UK

by Max Waller | 01.08.2018

Deal or no deal, any extra checks on goods at the border after Brexit will cause serious headaches for UK manufacturers. Even Theresa May’s “softer” Brexit plan threatens to disrupt businesses’ just-in-time supply chains which rely on our membership of the EU’s customs union and single market. Many companies could find it easier to up sticks and leave the UK, taking good quality jobs with them.

Being in the EU is very advantageous for UK manufacturers because it gives them unfettered access to a large range of different suppliers across Europe. They can get hold of parts in 27 other countries at no additional tariff cost and also rely on the same safety and other standards, making trade much smoother.

With no need for checks, it is possible to operate a very efficient supply chain: ordering parts as and when they are needed. For example, Honda has parts “flowing like water” to its production line, with some EU orders arriving between five to twenty-four hours after being placed.

After Brexit, and assuming we follow through with the government’s plan to leave the customs union, it will not be possible to operate such efficient supply chains because customs and other checks will be required – for example, confirming the origins of parts to ensure the correct customs duties are being applied.

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Using the time it takes to import into the US as a guide, Honda estimates that it will take at least an extra 24 hours in customs checks to import parts from the EU to the UK. One big fear is that the Channel Tunnel will become too congested to be used for importing, forcing parts to be shipped in. This could take as long as nine days according to Honda’s modelling – and then that relies on ports having the facilities to deal with the extra demand at the other end.

This fundamentally changes the nature of pan-European supply chains. Instead of being able to operate at point of demand, more storage will be required. Storage for nine days’ worth of parts would require 300,000 square metres of warehousing – the size of 42 football pitches. Honda does not have the capability to build or acquire that much storage space.

These problems affect all manufactures in the UK that rely on EU supply chains for parts. Hence the early warnings from aerospace giant Airbus in June that it could leave the UK if there’s no Brexit deal at all.

In the meantime, Brexit uncertainty means divestment from the UK industrial sector: investment in the car sector in the first six months of 2018 was half that received in the first six months of 2017. Meanwhile, international companies are ruling the UK of decisions about where to make products, shifting to other EU destinations where possible: BMW is moving the production of car engines out of Birmingham in preparation for a cliff-edge Brexit.

The result is simple: the problems caused to supply chains by leaving the EU’s customs union and single market will see international companies currently based in the UK moving abroad. Those smaller enterprises that are reliant on competitively priced EU imports but can’t move abroad will face dark days, with some likely to fold. Nobody voted to destroy the UK manufacturing sector, but in a world of globalised supply chains the impact Brexit may do just that.

This article was corrected after publication to make clear that 300,000 square metres of warehousing would be needed by Honda, not 300 square metres.

Edited by Luke Lythgoe

5 Responses to “Supply chain reaction to Brexit will see jobs leave UK”

  • This comment should be on national TV. and front page in all newspapers, then the message may get through to the hard brexiteers that you will destroy jobs and create misery for thousands of people that rely on “just in time” deliveries of essential parts and also fresh produce that at the moment pass through customs without delay.It is common sense that is needed now before it’s too late.

  • I agree with the previous comment. How is it possible that the information contained in this article by Max Waller does not get nation-wide coverage ? Can INFACTS see whether they can get all this information to the MP’s in Westminster, the BBC etc. ?Could public meetings not be organized where this information could be presented and debated if necessary with Brexiteers ? What are the Labour MP’s, whose constituents voted Leave, doing about informing their electors of the impact that all these consequences are going to have on their employment ?

    It seems truly incredible that with all the information available on the consequences of Brexit that the House of Commons can continue to be so passive while the country heads for disaster. THEY need to take back control of the matter; that is their constitutional and moral responsibility.

  • Agree totally with the two previous comments. Why on earth is this not being widely and loudly published and acted upon by our Remain politicians?

  • James Cook, David Quinn, Neil McCart. Why is this not being publicised? Because there is only one daily journal that would, but it only reaches a handful of people, and what many Brits still assume is an unbiased BBC, is in the pockets of the Brexiteers. Despite the unwritten rule that says she should remain a-political, maybe the Queen should make an impassioned plea to save her country?