The British government has asked businesses to map their supply chains to highlight areas of the economy that would be most at risk in a post-Brexit environment, assuming that additional trading tariffs will be imposed on exporters. The request, to the UK's main business lobby groups as well as large companies and trading associations for different sectors, has not been made public. However, Bloomberg reports that the aim of the request, which was sent out by the UK's Department for Business, Energy and Industrial Strategy in February, is to help ministers and trade negotiators understand which sectors and companies will face the worst financial impact once the UK leaves the EU customs union and how rules of origin will affect trade and costs.
Complex production processes
Bloomberg's Alex Morales also asks why it took so long for the government to start the processes of gathering this data on the supply chain, considering that we're now counting down the months before Britain leaves the EU in March 2019. Mapping the supply chains of large manufacturers is highly complex, notes Morales, with some companies using components “that cross borders several times during the production process”. He also notes that some companies will have to examine not only into their own supply chain, but also that of their suppliers.
Businesses may have to rethink supply chains
Sam Lowe, of the Centre for European Reform, told Bloomberg: “The only way you avoid the costs of rules of origin entirely is to remain in a customs union with the EU, but even then you might have some problems in relation to trade agreements with third countries. Absent the UK remaining in a customs union with the EU, it’s very difficult to see how in the long run, complex manufacturing in the UK remains viable.”
The Bloomberg news report comes from two people familiar with the issue who wished to remain anonymous. One of them told the news service: “But with Britain due to leave the customs union after a 21-month transition period ends in December 2020, companies will need to understand the barriers they face sooner than that. That’s because they may have to develop new supply chains or relocate production, both of which will take time - lots of it.”
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