Imagine a cargo ship fully loaded with goods that once moved freely between the UK and EU, now struggling with cumbersome customs procedures and potential double tariffs. This is not speculation but the reality facing logistics companies after Brexit. To cope, businesses are forced to reevaluate their supply chain strategies, with many establishing new operational centers within the EU. But what specific challenges has Brexit created for supply chains, and how can companies adapt to remain competitive in this new trade landscape?
Supply Chain Challenges Under the Brexit Trade Agreement
While the UK and EU reached a trade agreement at the end of 2020, establishing a foundation for economic relations, the practical impacts of Brexit have proven far more complex than anticipated. For logistics companies handling cross-border freight, the key challenges include:
- Double Tariffs: Products imported into the UK from non-EU countries and then re-exported to the EU now face double tariffs—first when entering the UK and again when entering the EU. This significantly increases operational costs and reduces competitiveness.
- Customs Delays: Post-Brexit, goods moving between the UK and EU must undergo stricter customs checks. Incomplete or non-compliant documentation can lead to delays, disrupting entire supply chains.
- Rising Operational Costs: Companies must invest in additional warehouses, customs specialists, and IT upgrades to manage new compliance requirements.
Sector Impact: Retail Bears the Brunt
The effects of Brexit vary by industry. Statistics show that in the initial phase, about one-fifth of freight vehicles were turned away at customs due to missing documentation, causing delivery delays. The retail sector—particularly perishable goods—has been hit hardest. Strict rules of origin requirements have left many retailers struggling with supply shortages and empty shelves.
For example, UK-based food companies using non-EU ingredients may fail to qualify for zero-tariff treatment, forcing price increases that erode competitiveness.
Strategic Adaptations: Rebuilding Operational Networks
To navigate post-Brexit trade conditions, logistics firms are implementing several key strategies:
- Network Redesign: Many are expanding EU-based operations to bypass UK-EU customs bottlenecks and maintain service efficiency.
- Workforce Adjustments: Companies must comply with new immigration rules, either hiring locally or securing visas for existing staff.
- IT System Upgrades: Investments in customs compliance software and origin-tracking solutions are now essential to meet new regulatory demands.
Additional Hurdles: Compliance and System Changes
Beyond tariffs and delays, businesses face:
- NCTS System Updates: The UK's exit required multiple adjustments to the New Computerized Transit System to align with international transport conventions.
- Stricter Documentation: New rules of origin require detailed component tracking, while HR systems must verify employee eligibility under updated immigration laws.
- Administrative Burden: Increased paperwork demands more personnel and hardware resources.
Advice for EU Exporters: Phased Preparation
With the UK implementing Brexit requirements gradually, EU businesses should:
- Ensure accurate product classification to anticipate inspection timelines.
- Monitor policy updates, as the UK extended its phased import controls to March 2022 due to pandemic disruptions.
Future Outlook: Potential Trade Agreement Revisions
Industry pressure may lead to further adjustments. The UK already delayed full border controls after businesses demonstrated preparedness challenges amid COVID-19. Northern Ireland secured an extended grace period for goods checks until October 2021. With public dissatisfaction growing over initial Brexit outcomes, calls for simpler trade procedures will likely intensify.
In this new era, supply chain success will depend on adaptability. Companies that proactively restructure operations, embrace technology, and stay ahead of regulatory shifts will be best positioned to thrive.