With the appointment of Boris Johnson as the United Kingdom’s new Prime Minister the real possibility of a no deal Brexit and consequent multi-industry supply chain disruption is a real possibility for the final quarter of this year.
In his campaigning, the Prime Minister has been rather clear that leaving the European Union by the October 31 deadline will occur, without a deal if necessary. In his initial address to Parliament, Mr. Johnson outlined a hard line negotiating stance, including re-negotiating the prior pact reached with the EU with Theresa May. That includes the termed Irish backstop.
This week, The Wall Street Journal reminded the UK and European business community of that escalated threat, and that the timing could not come at the worst time, being just before this year’s holiday season.
In terms of a timing scenario, October could be the worst.
Not only does it prelude the ramp-up for the Christmas peak, but also distribution of winter pharmaceuticals including the designated flu vaccines.
The prior end of May Brexit deadline had previously been pushed to the end of October to allow the ruling British government more time to convince Parliament to approve some form of a formal exit plan. Parliament has previously rejected a plan on three prior attempts. Just prior to the new Prime Minister’s appointment, Parliament floated yet another piece of legislation calling for no exit without some form of a trade agreement approved by the body.
What it Means
Businesses and logistics providers across the UK and the EU had already initiated contingency plans related to a hard Brexit, including the contracting for added warehousing, logistics and transportation capacity. According to this week’s WSJ report, some businesses cannot repeat contingency plans such as temporary plant shutdowns or pre-contracting for supplemental logistics and transportation resources because of the October timing and their own budgetary or operational constraints.
Indeed, if October 31 turns out to be the worst-case scenario in terms of customer demand and business supply network disruption, then added impacts and network dislocation may well be the 2020 scenario. Highly congested ports, long lines of lorries queued among nation streets and additional border stops and customs paperwork are not what supply chain management teams need in November and December.
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