Brexit and Its Impact on Logistics and Supply Chain Activities

The paper is based on the planned departure of the UK from the EU, also known as Brexit. The decision of Brexit is based on the decision taken through the voting system, in which 51.9% of the voters supported the exit of Britain from the European Union. The paper discusses the impact of Brexit on logistics and supply chain activities, including the impact on exports and imports, freedom of movement, customs and border controls, and supply chain jobs. The paper also highlights the importance of having strong logistics partners and the potential benefits and challenges for the retail industry. The decisions related to investment are expected to be influenced by Brexit, resulting in changes in the modeling of the supply chain. Overall, Brexit is expected to have a significant impact on the logistics and supply chain industry in the UK and Europe.

Running head: BREXIT
Logistics and Supply Chain Management
3/2/2019

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Table of Contents
Introduction................................................................................................................................2
Brexit......................................................................................................................................2
Influence of Brexit on Logistics and Supply Chain Activities..............................................4
Impact on Exports and Imports..........................................................................................4
Freedom of Movement.......................................................................................................5
Customs and border controls..............................................................................................6
Strong Logistics Partners Count.........................................................................................7
Retail Outlook....................................................................................................................7
Supply Chain Jobs – Winners and Losers..........................................................................8
Investment Decisions.........................................................................................................9
Conclusion..................................................................................................................................9
References................................................................................................................................11

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Introduction
Political instability is the key threat to the success of the business, operating their activities in
the worldwide supply chain. Companies with global sourcing should understand the adverse
effect, political instability could have on their relationships, quality, and productivity and
make strategies to overcome the risk (Aisen and Veiga, 2011). Political instability signifies a
major threat to worldwide supply chains. Through contingency planning and risk assessment,
these threats must be properly inspected. Political uncertainty is the tendency for
administration change, violence among people, uncertainty, and unpredictability in the
program of the government, like human rights, property, regulatory, law. Any change in the
political conditions comprising one or more of the abovementioned triggers have the
possibility to result in issues at the domestic level along with this it creates key worldwide
supply chain turmoil (Kettering, 2018). The intent of this paper is to discuss the planned
departure of the UK from the EU that is European Union called as Brexit and its impact on
the logistics and supply chain activities.
Brexit
Brexit is the abbreviation for “the exit decision of British from the European Union,” that is
Brexit on 23 June 2016. The results of the vote challenged anticipations and shaken the
worldwide markets. It also consequence in the fall of the British pound to the lowest level, in
comparison to the last 30 years dollar value. The Prime Minister, requested poll to continue
in the European Union, reconciled the following month (Goodwin, 2016).
“Leave” won 2016 vote with around 51.9% of the election, or it can be said that 17.4 million
votes; "Remain" got around 48.1% vote, or 16.1 million. Total number of voters available
was 72.2% (Times Now News, 2018). The fallouts were checked on the UK basis; however,

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the total figures cover unambiguous regional differences: around 53.4% of English electors
supported British Exit, in comparison to Scottish voters that are 38.0%. As the maximum
percentage of the UK population, is comprised of England who was in support of Brexit. If
the voting had been directed in the Wales area, where also “Leave” won, Northern Ireland
and Scotland, Brexit would have got only 43.6% vote (Hobolt, 2016).
Source [(Hobolt, 2016)]
European Union mostly called, as the EU is the political and economic partnership,
comprising 28 European nations. It was established after World War II in order to nurture
monetary co-operation, with the notion that nations, which do trading together, were likely to
evade going for the battle with each other. EU has been founded to be the "single market"
authorizing people and goods to travel everywhere, because the states with the membership
are one country. The EU has Euro as its distinct currency, which is consumed by almost 19
nations of the member states (Hunt and Wheeler, 2019). EU has its parliament that is focused
towards setting the rules in the broad range comprising consumer rights, environment,
transport, and regarding things like charges of the mobile phone.
UK is said to be the open economy with a comparative advantage in terms of services that are
dependent majorly on trade with the EU i.e. the European Union. In the year 2015, the trade
openness of UK, evaluated by totalling the imports and exports relative to GDP, was 0.57, in

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comparison to 0.28 of the US and around 0.86 for Germany. The EU comprises 44% of the
United Kingdom's exports and around 53% of the imports. Overall UK–EU trade was 3.2
times higher in comparison to the trade of United Kingdom with the United States, which
makes it the second-largest partner in terms of trade. The trade of UK–EU is considered very
essential for the UK in comparison to the EU (Sampson, 2017).
Influence of Brexit on Logistics and Supply Chain Activities
Impact on Exports and Imports
Britain and many of the member states of EU possess a service-based economy, which
reflects that they have to majorly dependent on the import of natural resources. Numerous
European Union nations are linked based on their imports of petroleum and fuel products,
with around 27% of petroleum products of Britain, for instance, moving by the EU on the
way to Britain. If the negotiation related to Brexit resulted in British exit from the EU, then
tariffs will be imposed to all the products taking entering into the United Kingdom from any
of the European Union nation which will make those products more expensive (Global
Council, 2015). Increasing prices of the export will be not beneficial for the countries
involved in exporting of goods, or for Britain, and the increasing costs will have a ripple-
down influence on the industry of logistics. Eventually, there will be customers all over in
Europe who will feel this influence very intensely, as haulers and companies of logistics will
merely pass on the augmented costs to their consumers.
The prices of the fuel must be a specific issue because the fields of North Sea Oil of the
country cannot fulfil the demand and around quarter of the fuel products, utilized in the UK
arrive via the nations of EU. If fuel from member nations of the EU becomes expensive, it is
expected that the companies of logistics will pass on the increased cost over consumers (Zaidi
and Wang, 2017).

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The discussions can also place exports from the United Kingdom at a competitive
disadvantage. For instance, the United Kingdom presently leads Europe in terms of products
produced from its substantial herds of sheep, mainly wool and meat. Though this part of the
market is majorly endangered by the prospect of a severer deal, which will see the United
Kingdom revert to the rules of WTO (World Trade Organization) (Fox, 2017). This will carry
a host of trade tariffs and another red tape, which creates certainty that rivals from Europe
market, will seek to relocate themselves as the inexpensive and simpler substitute to goods
from British.
In a few of the cases, there can be silver facing to all these barriers of trade, as they can
inspire innovation. For instance, few of the industries think leaders are discussing Brexit as
the possible catalyst for the alternative sector of fuel, and are expecting that it will stimulate
the manufacturers of van and truck to spend heavily in the Research and Development to
develop commercial vehicles that are not dependent on the traditional fuels (Fox, 2017).
Ecologists have been supporting this approach for the last several years, but Brexit may
provide the country with a convincing financial incentive for decreasing its reliance on fossil
fuels. Emerging transport resolutions grounded on alternative fuels will have a double
advantage: decreasing pollution level and declining reliance on imported fuel.
Freedom of Movement
Residents of the member states of the European Union, presently have the freedom to live
and operate in any of the countries of the EU. Britain has been long profited from this setting,
with European Union workforces making up a noteworthy proportion of workers in an
extensive cross-section of businesses. For instance, in the United Kingdom around 10% of
commercial drivers belong from other countries of the EU (Supply Chain Digital, 2017).
Even as Britain once provided an outstanding opportunity to the drivers belonging from other

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countries of EU, many of those drivers are today moving back to the land for the jobs, due to
the fear that they will be used as a doll in dialogues.
The uncertainty near to the residency rights, for the European Union workforce in the United
Kingdom is creating a pre-existing issue in the industry of logistics: Britain, like numerous
nations, is dealing with lack of skilled commercial drivers. If Brexit limits the choices for the
European Union nationals to operate in the United Kingdom transport industry, it will result
in increasing the earning of the British drivers, but it must be considered that would it be
sufficient to inspire youngsters to select driving as the career option (Supply Chain Digital,
2017).
The major alternative option open to Britain, is making use of the logistics industry as the
targeted section for the overseas staffing. The government of Britain is now discovering
conducts, through which it can evade a ‘talent drain’ after the movement of Brexit, and
singling out precise subdivisions, for special immigration behavior might be an option
(Supply Chain Digital, 2017).
Customs and border controls
In the Schengen contract, people living in the member states of the European Union enjoy
very calm border controls and are usually allowed to cross the boundaries without being
restricted. The Single Market reflects that services and goods can be easily operated all over
the Eurozone. Unavoidably, the time Britain leaves the European Union; there will be key
changes such as reinstatement of strict border controls between EU and Britain. Trade
between Northern Ireland and the Republic is very strong, and it has been thought that the
strict border controls can cost high in billions yearly, with a knock-on influence experienced
all over in the logistics industry (Supply Chain Digital, 2017).

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In terms of logistics industry of EU, it is important that the negotiation and discussion must
take place in a progressive and constructive manner, deprived of any doubts. Every member
state requires best results from the Brexit and it is expected that the negotiators could identify
the best way, such that the Britain exit result in success (Barrios, 2019).
Strong Logistics Partners Count
According to the recent survey, by CIPS of European and United Kingdom supply chain
directors identified that 40% of the United Kingdom businesses, are presently seeking to
swap their suppliers of EU, and 25% of huge United Kingdom businesses (or companies with
more than 250 personnel) have independently invested more than $131,943 (USD) organizing
their supply chains for the Brexit. (Odyssey, 2018)
According to Forbes, the costs of the businesses will increase due to the regular influence of
the currency fluctuation, with around 64% of the United Kingdom (Odyssey, 2018). The
business directors, have claimed that their supply chain is becoming more expensive that they
are unable to manage. Besides this, the reports highlight that more than a quarter respondents,
are moving towards different track and trying to improve their relationships with the
suppliers in the region.
According to the Odyssey Logistics Europe BVBA, Managing Director that is Toine
Matthijssen, the company is regularly watching the progress on the Brexit and the way it is
influencing the supply chain of the world. This reflects that, the time has arrived to ensure
expertise logistics partners that can support in fulfilling; the altering needs of the business and
can strongly face the uncertainty that can be presented by Brexit (Odyssey, 2018).
Retail Outlook
According to the e-commerce executive, Brexit can also provide benefits to the retailers and
organizations of logistics in the United Kingdom, in the short-run, because the weakened

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value of the pound can increase foreign buyers who buy products for less (Supply Chain 246,
2016).
From the perspective of the retailer, the voting from the United Kingdom to leave EU has
resulted in making the nation all over the region closely resemble China, Japan, and America,
as it has made the procedure of distribution and shipping complex. Down the line, the
operations of the retail supply chain can become more complex, due to the restructuring of
the distribution channels with specific restrictions.
Supply Chain Jobs – Winners and Losers
Source [(O’Marah, 2016)]
United Kingdom experience a few challenges in the modern worldwide supply chain.
Scheduled supply chain hiring (sourcing, planning, logistics, and manufacturing jobs) in
Britain is reducing. According to the survey conducted by Forbes, around 83 respondents
says that the country is included in the top three nations scheduled for headcount decline,
whereas just 56 respondents added new positions. However, the ratio of reduction to addition
is better, in comparison to Germany with 80:45 and even better than the ratio of France,
where 86 of the respondents projected to decline, and 17 respondents planned for addition

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(O’Marah, 2016). Investments in the new plants are the two euro is rare, especially for
multinational or global businesses.
The only country of European Union that is forecasted to gain an increase in the employment
of the supply chain segment is the Netherlands, where 31 of the respondents predicted an
increase in the position and just 21 of the respondents expected cut in the positions.
Investment Decisions
The decisions related to investment are expected to be influenced by Brexit. There will be
fluctuations in the labor, cost, and trade restrictions which will result in changes in the
modeling of the supply chain. This is just because with the time the supply chain has become
more complex (Gibbs, 2016).
Conclusion
The paper is based on the planned departure of the UK from the EU, also known as Brexit.
The decision of Brexit is based on the decision taken through the voting system, in which
51.9% of the votes were in the favor of "Leave" and 48.1% of the votes were in the favor of
"Remain,” with 17.4 million votes and 16.1 million votes respectively. Around 53.4% of
English electors supported British Exit, in comparison to Scottish voters that are 38.0%
because the maximum percentage, of the UK population is comprised of England. The major
part of the discussion is based, on the influence of Brexit on the supply chain and logistics
activities. The negotiation related to Brexit, if British did not remain the part of any single
market, tariffs would be imposed to all the products taking entering into the UK boundaries
from any the countries of EU, which will also make those products more expensive.
Eventually, the logistics companies will impose the increased cost of the operations on the
customer. However, Brexit can result in a positive movement for Britain, as it will encourage

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innovation into the country. With the increasing prices of the fuel will force the
administration of the country to encourage the manufacturers of the vehicles to produce fuel
alternative vehicles such that they can deal with the increasing prices of the fuel due to
Brexit. Moreover, if Brexit limits the movement of labor and raw material in Britain, the
country will experience lack of experienced drivers because 10% of commercial drivers
working in the United Kingdom belong from other countries of EU. Brexit will also result in
changing the customs and trade regulations, which will result in increased taxes and export
duties. Overall, it has been analyzed that if Brexit is executed then Britain has to experience
some challenges in terms of supply chain and logistics activities.

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border: Report [online]. Available from

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