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T0 BE OR NOT TO BE in the UK, after Brexit that is the question for EU businesses

posted onMarch 20, 2018

One in seven EU companies with UK suppliers had moved part or all of their business out of Britain in advance of Brexit, according to a survey by the Chartered Institute of Procurement and Supply (CIPS) published on Tuesday. 

CIPS said  that 14% of EU firms with assets in Britain, such as offices, warehouses or factories, have scaled back their business while 11% of the responding companies have already shifted part of their workforce out of the UK and 9% have lost contracts or had them cancelled.

Almost a third (32%) of U.K. businesses with suppliers from the bloc have increased prices as a result of Britain’s 2016 vote to leave the EU. To make matters worse, two-fifths (41%) plan to increase their prices in the future in order to offset the potential costs of Brexit, while 23% plan to cut jobs, the survey of  more than 2,000 supply-chain managers globally showed. 

“Businesses have little choice but to pass on some of their rising costs to consumers in order to protect their profit margins and stay in business, as a result of the crippling cost of Brexit”institute economist John Glen said in a statement.  “In the end, businesses that fail to plan ahead and use this opportunity to reduce costs in their supply chain may not survive post-Brexit.” he added.

The  survey also found that  since the Brexit vote, the EU is beginning to reassess the value of UK products.Two-in-five (42%) of EU supply chain managers do not think British products “stand out from the crowd”, and 37% said working with local supplier would be cheaper compared to a UK one. 

With still one year to go until the UK’s departure from the EU, 22% of British businesses with EU suppliers are having difficulty securing contracts that run after March 2019.  In response, a third (36%) of UK supply chain managers with EU suppliers said they are already lookingto re-shore their supply chains back to the UK. 

UK Reaches 21-Month Brexit Transition Deal With EU

The CIPS research is the third in a series of surveys which have tracked the impact of Brexit on supply chains since May 2017. Respondents came from a range of sectors including manufacturing, financial services, retail and construction. 

The survey was conducted before Monday’s announcement of the Brexit transition deal between UK and EU. The  21-month transitional deal enables the U.K. to continue its membership of the Single Market and customs union until the end of 2020. During that period, the country will operate under current EU rules to give companies time to prepare for Britain’s departure. However,  the British government won't have any say in decision-making that will involve the future of the EU.

Unilever's HQ in Rotterdam
Unilever's HQ in Rotterdam, The Netherlands

Moving out, moving in 
Last week,  Anglo-Dutch consumer goods giant Unilever, picked Rotterdam over London as the location of its new unified headquarters. Britain's third-biggest company, with annual UK sales of around £1.8bn, denied the move was related to the Brexit vote but commentators said it was “a sharp  blow to Britain's status as a European business hub ahead of Brexit”.

Unilever has maintained separate headquarters in Rotterdam and London since it was founded in 1930 and employs nearly 170,000 people around the world. The company will continue to be listed on the London, Amsterdam and New York stock exchanges.

Rolls-Royce Holdings Plc sent a survey to its suppliers in January to identify potential issues post-Brexit according to Bloomberg. The jet-engine maker said it was “important we understand the position of our suppliers in relation to key Brexit issues, their state of preparedness, and what is causing them concern."

GlaxoSmithKline Plc, the U.K.’s biggest drugmaker, expects Brexit to cost it £70million ($98 million) over the next three years, with ongoingcosts of £50m- including customs duties and transaction or administration costs according to estimates in its annual report. 

Who knows maybe other companies will come to replace the ones moving out. Because London will always be London. 

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