CEO, Mike Danby MBE, recently appeared in the largest financial newspaper in the world, The Nikkei.
Read the original article below to see Mike's advice to UK businesses facing Brexit.
Imminent “leave without agreement” The response of the British industry
The UK industry has begun to face an unforeseen situation in less than three months until the end of October when the UK leaves the European Union. While Prime Minister Johnson reiterated that he wouldn’t leave the “no-agreement” if he had n’t settled with the EU over the exit conditions, he did n’t show a way to avoid economic turmoil. British economic groups have called on member companies to urgently take measures, but each company’s response has been delayed.
Corby, a city in central England, about two hours away from London by car. Products and raw materials from customers are brought into a new warehouse of approximately 22,000 square meters completed by a logistics giant Advanced Supply Chain Group in June. Demand for companies to prepare for the disruption of the supply chain (supply network) due to withdrawal without an agreement has increased, and the warehouse usage rate of the entire company is almost 95%.
However, political strays continue, with the withdrawal deadline postponed from the end of March, which was initially scheduled, and companies are also experiencing “Brexit fatigue”. Mike Danby, CEO, said, “Some companies have forgotten to use their stockpiling costs if they are more expensive than the damage caused by a few weeks of logistics disruption.”
In late July, the British Industry Federation (CBI), Britain’s largest economic lobby organization, compiled a report on the status of the EU exit. Of the 27 sectors, only 4 sectors such as aviation are said to be “prepared enough” for companies.
The biggest challenge is maintaining smooth logistics. If there is no agreement, the trade between Britain and the EU, where goods of £ 437.8 billion (approx. 56 trillion yen) went back and forth in 2018, tariffs and customs clearance procedures will be revived, and trucks will be stuck in ports and strait tunnels. There is a risk of logistics disruption.
The British government has introduced a “Transition Procedure (TSP)” system that can simplify import clearance as one of the measures to prepare for withdrawal without agreement. However, out of approximately 240,000 companies that need to be dealt with, pre-registration has been completed at only 17600% in May as of 17,600.
CEO of Europe Airbus, Guyom Foley, who has 25 production bases in the UK, including aircraft wings, has strengthened the alert that “the riskiest field is the logistics network.” The company says it has an extra parts inventory of about a month.
On the 7th, the top of a British food organization that also includes Swiss Nestlé and Danone, France, pointed out that some products could be missing from the store in months if they leave without an agreement. In 18 years, 28% of the food consumed in the UK was imported from the EU. The pharmaceutical industry is also worried about delays in the procurement of raw materials for drugs and keeps stocks thick.
On the other hand, in the regulated industries such as finance and aviation, the authorities and companies have been keeping pace. In preparation for the case where the UK is out of the EU’s single financial license system, major British banks, such as Standard Chartered, established a base in the European continent and obtained a license. UK and EU financial authorities have confirmed that cross-border derivative (financial derivative) settlements and insurance contracts continue, and the Bank of England (Central Bank) sees the financial system as a foundation even if it is withdrawn without an agreement.
The EU recognizes that flights between the UK and the EU will continue to operate for one year even if they leave without an agreement.
However, just confirming the current status of the immediate situation, there is a strong sense of uncertainty in the medium- to long-term handling. There is no denying the possibility of an unexpected impact if you leave without an agreement.