HRM - From Brexit to Brexit plus COVID-19

Programme: MBA – Masters of Business Administration
Module: Human Resource Management
Module code: LCMB7000
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Introduction: From Brexit to Brexit plus COVID-19
Businesses in the United Kingdom worked feverishly in 2019 to prepare for the possibility of a
catastrophic no-deal Brexit. However, business attention was diverted to dealing with the
pandemic's widespread and rapid impact after COVID-19 took root in 2020 (Hadjimichalis,
2021). Industry executives are being pushed to choose between a cautious reopening of the
economy and an impending dramatic change in trading conditions with the EU. The transition
period between the UK and the EU will expire on December 31, 2020. Due to the sluggish pace
of negotiations, a trade deal may not be struck, or its scope may be significantly curtailed. As
both the UK government and the European Commission have stated, trade between the UK and
EU would undergo considerable changes regardless of whether a future partnership is established
(Smith, 2021). As a result of COVID-19's huge impact on the economic climate around Brexit,
business leaders must weigh the two. COVID-19 would be significantly worse even if Brexit had
no immediate economic impact. Lockdowns have had a greater influence on-demand than ever
before (both locally and globally). Despite this, Brexit will have long-term ramifications (Bloom,
2020).
Between Brexit and COVID-19, there is a connection between people/resources and resourcing.
This study investigates how the combined crises present themselves in businesses' day-to-day
operations and what organizations can do to adapt to them.
Inter-connected economic shocks
COVID-19 and Brexit are two unique economic shocks. COVID-19 has resulted in some of the
UK's and other European countries' greatest GDP losses. Despite the impossibility of forecasting
long-term social and economic repercussions such as supply chain disruptions or changes in how
individuals and organizations function, most impacts are expected to be short-term (Blomkvist et
al,. 2021). Brexit is expected to result in generally predictable but lasting changes to the UK's
commercial relationships with the EU and other trading partners. COVID-19's immediate impact
on demand and growth is greater than that of Brexit. On the other hand, the supply-side
interaction is significantly more complex. There is a chance that the consequences of these two
economic shocks will compound one another, as both will have a different influence on supply
networks. As the heat map illustrates, different sectors are frequently hardest struck by the two
shocks concurrently (McCann, 2021). Brexit and the epidemic, on the other hand, are unlikely to
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have a substantial impact on the economy. Numerous sectors are also at risk due to the outbreak
and the Brexit vote.
SUPPLY CHAINS
Brexit and COVID-19 directly affect supply chains, and the automotive industry is likely the best
example of a sector that has been disproportionately impacted. It exemplifies the issues that other
sectors experience, albeit more subtle (Garnett et al., 2020). Automobiles are on the verge of a
double-dip recession. This industry relies heavily on free commerce. A typical automobile in the
United Kingdom contains around 30,000 components, most of which are imported from Europe
and abroad. Excessive cross-border traffic throughout the vehicle manufacturing process
complicates the process of Brexit. Because certain supply chains are no longer ideal or cost-
effective, they have been shifted, but this has necessitated the installation of systems and
personnel to handle the added documentation and checks required (Roscoe, 2020). Even though
many of the world's major car manufacturers operate globally, these procedures are frequently
well-known and well-managed within their organizations.
Brexit tariff uncertainty
Businesses are gravely concerned about the situation of tariff policy at the moment. A 10% tariff
on exports (the EU tariff that UK exporters would face in the absence of a free trade agreement)
is predicted to cost £1.8 billion in a free trade agreement (Holweg , 2019). Regardless of whether
a free trade agreement is struck, it will be difficult for vehicle manufacturers to adopt new origin
laws (Skeete, 2020). Electric vehicles rely more and more on components made in Asia by
electronic and battery manufacturers. Hence, these vehicles may not match the expected UK/EU
content criterion needed to qualify for any favourable tariffs (Yian et al.). Because the UK and the
EU have an FTA with nations like Japan, vehicle parts from Japan might count toward meeting
any preferred tariff threshold under the UK's "diagonal cumulation" solution. Even if the EU
rejects this strategy, taxes will remain on certain automobiles (particularly electric vehicles).
What is the COVID-19 demand hit?
Automobiles also serve as a gauge for the rapidly declining level of customer demand. COVID-
19 has also substantially impacted vehicle demand, with new vehicle registrations declining by
40% from January to August (Semenov, 2021). As a result, the entire vehicle supply chain is
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being affected. Several vendors have put a stop to their business. Many others have returned to
the full operation but at a reduced capacity. Brexit could impede recovery in numerous ways that
have not yet been highlighted (Kamal, 2021).
Is there a silver lining to the new context?
Demand has reduced due to COVID-19 and the Brexit vote, and supply chains have become
more uncertain. On the other hand, Brexit can be prevented in a COVID-19 setting in a variety of
ways (Watterson, 2020). Customs procedures at Dover may be less disruptive due to less
demand, decreased business between the UK and EU, and decreased automotive travel. Certain
manufacturers and suppliers may get some relief from Brexit-related stress, at least in some
sectors.
How are supply chains being remade?
There are significant connections between Brexit and the automotive industry's COVID-19 on
the supply side. As a result of fewer workers or issues in guaranteeing workplace safety,
suppliers are finding it difficult to operate under COVID-19 standards. Others have discovered
that keeping plants closed until demand rises is more cost-effective. Replacement suppliers must
be found immediately due to the bankruptcy of several smaller providers. This raises costs and
unpredictability in the supply chain (Anderson et al., 2020). In the wake of Brexit and COVID-
19, the automotive sector is rethinking its supply chains. Diversity is much more important than
pure efficiency in today's workplace. The industry is searching for a new attribute in the supply
chain: resilience. De-globalization may also be on the rise due to a trend toward growing
nationalization of supply chains, even if component costs only go up a little (Zambelli, 2020).
Supply chain assumptions and next steps
• Get to know your supplier chain better. Businesses that completely implement this task are
better prepared to deal with the twin economic shocks expected in the future (Schatteman et al.,
2020). The ability to analyze and respond to COVID-19 and Brexit more quickly is possible by
increased transparency and clarity throughout the supply chain.
• Prepare your supply chain for future events such as Brexit and COVID-19. Their chief
operating officers appear to be reevaluating their global sourcing relationships (Ramanathan et
al., 2021). It is critical for firms considering expanding their supply chains to include EU nations
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