The UK has left the European Union (EU), with ongoing talks about what the relationship will be after the Brexit transition period, which ends on 31 December 2020.
Whether a deal is agreed upon ahead of the end of the transition period, or in the result of a no-deal Brexit, there will be changes that manufacturers should be preparing to deal with right now.
This article explores the implications of what happens after the Brexit transition period and offers three pieces of advice to manage your manufacturing business in a time of increasing complexity.
How will Brexit affect manufacturing?
UK manufacturing is resilient and has a rich history, accounting for nearly half of UK trade.
A different relationship between the UK and the EU represents opportunities as well as threats, and you need to prepare, whatever happens. Irrespective of whether a trade deal happens or new tariffs.
Worldwide, there will be new market opportunities and supply networks to tap into, with room to forge new relationships.
In January 2018, the UK government released a white paper with a post-Brexit modern industrial strategy, promising billions of pounds of investment in technology and Industry 4.0, as well as a commitment to play a more active role in boosting the industrial sector.
Smart and transformational technology, such as the Internet of Things, may allow businesses to take advantage of what could be on offer. I
t would help if you also looked at embracing environmental sustainability, supporting green technologies and strategic moves with the circular economy.
The UK will leave the customs union and single market, which includes changes in the way you import and export, the way you hire from the EU, and the way you provide services.
There are certain things you need regardless of whatever happens with negotiations concerning a trade deal. For example, preparing for different custom procedures and residency rights for staff is a necessity.
Whatever the future scenario, you need to make sure you’re prepared with the right tools and insights to make the most of a new era.
The most successful companies will have visionary leadership and will play to their strengths while minimising their weaknesses.
Three ways to prepare for Brexit
Here are three areas that you as a manufacturer should prioritise to manage after the Brexit transition period ends.
1. Keep goods moving
Perhaps the most immediate priority for British manufacturers (and distributors) is to understand how various post-Brexit transition period scenarios may affect their supply chains and the movement of goods.
- Tariff exposure and other costs.
- Compliance – irrespective of a Brexit deal (and free trade agreement between the UK and EU) or no-deal Brexit (and the transition to World Trade Organisation rules) goods will need to be declared, with custom procedures applied and opportunities for tax/duty planning.
- Relationships with suppliers – if manufacturers rely on specific components, understanding how this will work after the Brexit transition period will be a priority as lead times may increase.
- The security of customer relationships and the effect on demand volume, contract terms, pricing and rebates.
- The loss of EU research and development grants and the impact on product marketing and procurement.
It would help if you examined your supply chains closely, taking care to understand where delays may potentially hit your business.
You should also make fair use of data analytics – this could help you examine how you can consolidate goods and understand if warehouses need relocation.
And ask your suppliers about their plans for leaving the Brexit transition period.
You might need to register as an Authorised Economic Operator (AEO), an accreditation that allows businesses to register to apply simplified customs procedures to fast-track their goods through customers border controls and provides assurance to HMRC that their import/export practice is secure.
Supply chain strategies needn’t just be about mitigation. You should be looking at challenging what’s happening in your supply chains and see if you can do things differently.
Reducing lead times and deferring the time when you pay duties makes sense in almost every scenario.
You may benefit from considering trade opportunities with countries outside of the EU, such as China and the US – a different set of challenges when it comes to working practices, culture and language.
2. Adopt new technology and innovation
The fourth industrial revolution, or Industry 4.0, is already making a considerable impact on British manufacturing.
Bringing together technology such as the Internet of Things (IoT), cloud computing and artificial intelligence (AI), you should embrace technology once the UK leaves the transition period. It offers excellent opportunities and benefits when it comes to productivity and efficiency.
AI and automation, for example, provide an opportunity for businesses to scale up the volume to meet demand from outside of the EU, helping to keep production costs low and assisting the development of new products for new markets.
Automation has already changed manufacturing processes around the world, and there will be new systems that can perform tasks usually done by humans, which will save money and improve efficiency.
Rather than purchase technology haphazardly, you must understand the specific business challenges you have and make the right investments, efficiently and effectively, to gain a competitive edge.
Through research, development and investment, you could already be familiar with what technology can do for you.
You won’t merely be thinking about the latest shiny new tech – you’ll be choosing digital technology that can transform your business processes and which may have been validated by similar companies.
Ultimately, managing complexity with digital transformation and technology investment is very similar to preparing for any other type of business challenge – finding ways to satisfy customers, create better quality products at lower costs, and making them available to as many people as possible in the global marketplace.
3. Invest in the right people
Managing your business after the transition period is also about recruiting and retaining the right staff to drive success.
To fully implement the benefits of Industry 4.0, you must have a strategy of upskilling existing employees to deliver digital transformation.
Manufacturing is changing.
Take 3D printing, for instance – additive production techniques have radically transformed production processes. You move away from traditional subtractive production and the conventional assembly line, and towards a process where skilled engineers design manufacturing products digitally.
Of course, the restriction of free movement across the EU may cause you to face problems of recruiting enough people to run traditional factory and supply chain processes.
You should audit your current workforce and look at ways to maximise the return on investment from existing employees and contractors.
You will also want to review and evaluate what your long-term strategy is for recruitment and retention policies.
It will help if you have a genuinely collaborative approach supporting your employees to work through their concerns, giving them the space to engage and remain productive.
Longer-term, take a look at reaping the benefits of an increasing focus on the teaching of science, technology, engineering, arts and maths (STEAM) subjects at schools, colleges and universities.
Providing excitement to students when it comes to learning about technology and improving their knowledge and skills can only benefit the workforce in facing the changing economic landscape of tomorrow.
Editor’s note: This article was first published in October 2018 and has been updated for relevance.