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Brexit Causing Uncertainty For Global Supply Chain

By March 18, 2019 January 29th, 2020 No Comments

Brexit Duties Deadline

On March 13, British Parliament voted down the idea of leaving the E.U. on a “no-deal” scenario in which the primary concerns of avoiding a hard border with Ireland and deciding what tariffs to implement would not be addressed.  The vote was no landslide however, with a 312 ‘against’ to 308 ‘for’ final tally.  With the approaching March 29 Brexit deadline looming, the vote on extending that deadline passed last Thursday with a 412 ‘for’ to 202 ‘against’.  However, beyond that point the picture is unclear as the U.K. will be faced with a number of options on how to proceed with their exit from the E.U.  The few concrete factors to the situation include the deadline being pushed back to June 30, and businesses are highly against a “no-deal” Brexit as proceeding in that direction would adversely affect their supply chains and revenue.

Brexit Expert Insights

With 2 solutions to the Brexit “no-deal” scenario voted down by Parliament, the scenario remains largely up in the air for how the U.K. plans to exit the E.U.  In addition to the deadline extension, Parliament voted on an amendment to result in a second referendum that was voted down.  Furthermore, professor of political science at the University of Pennsylvania, Brendan O’Leary stated that a viable option for reaching an agreement on the Brexit would be the Norway option.

The Norway scenario would allow the U.K. to still be a part of the E.U. single market, but would decrease the U.K.’s voice in shaping the conditions due to no longer being a part of the E.U.  However, based off of the current solid facts of the situation the possibility for a second referendum is still looming.  Should another time crunch with the new June 30 Brexit deadline present itself, the possibility of Conservative members of Parliament voting for a second referendum increases.

Furthermore, the overview of the ongoing Brexit scenario demonstrates how interconnected the supply chains of the U.K. and E.U. really are.  Additionally, we would recommend that companies with supply chains in these geopolitical areas take a close look at the situation and find ways to mitigate the risk of additional import and export duties going into effect once a deal is struck.  Adidas is a great example of a company that has taken steps to mitigate Brexit risks by centering their European supply chain in Germany and the surrounding areas.

BM2 Freight Services, Inc.

Phone: (859) 308-5100

Email: Sales@BM2Freight.com

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