As the UK approaches the end of the Brexit transition period on 31st December, I wanted to share with you what ProTec sees as the main challenges regarding continuity of supply from 1st January 2021. Unfortunately, as of today, there is still a lot of uncertainty as to whether a trade agreement will be established between the UK and the EU, and therefore what the implications will be on and after 1st January. It looks like it will be at least a few more weeks until we have more clarity.
What are the Implications of No Trade Deal between the UK and the EU?
If negotiations between the UK and the EU do not conclude in a formal agreement regarding their future trading relationship, the UK Global Tariff (UKGT) will replace the EU’s Common Customs Tariff. UKGT will apply to all imports into mainland UK, in the event of no trade deal with the EU, but may not if a deal is agreed. One thing is clear: with or without a trade agreement, the time it takes to import goods from the EU, and the associated costs, will increase. There are also further implications if a trade deal is not reached:
- A potential further weakening of the Pound versus currencies such as the Euro, Dollar and Swiss Franc.
- Import duty may need to be applied to goods imported from the EU, although some goods may become duty free under UKGT (regardless of origin). Further information can be found here: https://www.gov.uk/check-tariffs-1-january-2021
- Increased customs checks on goods arriving from the EU, leading to congestion at both sea and air ports, and delays in the clearance and onward delivery of all goods (regardless of country of origin).
Obviously, this scenario has implications to both pricing and lead-times:
- Unfortunately, we are unable to absorb the impact of a further weakening of Sterling and, should this happen, your pricing will have to be increased at short or even no notice.
- In order to give as much transparency as possible, we are currently working to the following exchange rate bands:
GBP 1.00 = EUR 1.06 – 1.14
GBP 1.00 = USD 1.20 – 1.30
GBP 1.00 = CHF 1.19 – 1.29
- Any movement outside of these bands for a maximum of one month may result in pricing being adjusted accordingly on all relevant products.
- Additional duty to goods.
- Unfortunately, we are unable to absorb any additional duty that becomes liable.
- Should a product that currently incurs duty become duty free under UKGT terms, we will reduce the price of that product accordingly.
- Increased lead-times.
- We are in regular dialogue with our logistic partners to ascertain the extent of potential delays and their effect on our lead-times.
- All of our logistic partners for the importation of goods have Customs Freight Simplified Procedures (CSFP) approval, to ensure that any delays are kept to a minimum.
- The Government themselves are advising of a potential delay at port of up to 2 days (https://www.gov.uk/government/publications/reasonable-worst-case-scenario-for- borders-at-the-end-of-the-transition-period-on-31-december-2020). Experience tells us that an additional week will be the minimum we will need to apply, at least in the early days.
- Our advice is to place any orders due for delivery in January now and we will look to bring the material into stock in December, depending on lead-time and availability.
- Existing orders already placed for delivery in January can also be brought into stock in December, subject to lead-time and availability, at your request.
- Additional costs that may need to be applied due to:
- Increased waiting times at port.
- The possibility of having to use two drivers on certain routes to comply with driving hours regulations.
- Any and all additional documentation/paperwork/customs declarations.
We are hopeful that a trade deal can be reached between the UK and the EU (although, some of the above implications may become reality, regardless of whether a deal is agreed or not) and, especially, that the most disruptive and significant financial repercussions noted above do not materialise. We are here to help and assist you as much as possible, and will continue to keep you informed, as the need arises. In the meantime, please do not hesitate to contact us, should you require anything further.