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As global markets steadied following the news that the UK had chosen to leave the European Union following a referendum, uncertainty remains over what the long-term consequences will be for businesses that have for years enjoyed the benefits of unhindered between the UK and the EU. Procurement is set to be at the forefront of the discussions of the implications of the vote, but there are a few things the function should be doing right now to avoid the negative consequences of the UK electorate’s decision.
At the moment, there are no concrete plans around what the UK wants in terms of its relationship with the EU. While governments may be unprepared, procurement must not be. There is a real need to speak to your suppliers and have an open and honest conversation about what the implications might be. Suppliers in the automotive sector have already voiced concerns that Brexit will dampen UK exports in the sector. Rather than keeping your cards close to your chest, lines of communication need to be opened and solutions sought to what could be major changes to contracts, regulations and the rules of trade.
Use this as an opportunity to find out in more detail where your suppliers are and where your suppliers operate out of. If you don’t do this now you will leave yourself open to problems further down the line. Once you have done that, get in touch with your legal department and look at your supplier contracts to find out how they will be impacted.
Avoid the temptation of making rash decisions about your supply chain. Nothing has been decided yet and as such nothing has changed. A move to drop suppliers because they are based in the UK could do more harm than good and will only exacerbate an already difficult period. With suppliers, procurement needs to keep up to date with what is currently a fluid situation and watch out for the latest statements from either the UK government or the EU itself.
The option of a ‘Norway-style’ agreement, whereby the UK retains access to the single market as a member of the European Economic Area while no longer being an EU member, is likely to be the most beneficial to procurement. Free movement of goods and services will continue making trade with suppliers simple to navigate. The other scenario, in which the UK gets more control over the movement of people into the country comes at the cost of the single market and, with it, the potential renegotiation of all trade contracts, opens up a whole host of potential issues.
While this all may currently be ‘ifs’ and ‘buts’, if there is anything the function has learnt over the last few years it is that anything can happen.
Rather than hope for the best, procurement must prepare for the worst.
This article is a piece of independent writing by a member of Procurement Leaders’ content team.