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Feature - 25 November 2020 (ChannelPro)

No one yet knows the exact terms on which the UK will begin its life outside the EU in January — or how it will affect the channel

Despite continued uncertainty and a rising chance of no deal, the channel needs to prepare for a slew of changes when the Brexit transition period ends on 31 December 2020. Even with an agreement, supply chains, lead times, hiring strategies, regulatory compliance and more will need to evolve – with potential cost increases attached.

Andrew Buss, research director at IDC, notes that more due diligence on contracts and service levels will be required, with longer lead times for inventory, and customs processed on the UK border. This probably doesn't mean a resurgence in UK assembly, however.

"We used to have bigger assembly plants in Scotland that could actually be built up again. But it may be simpler to just buy from the EU and pay the tariff," he says.

"And it's likely we'll be shut out of any integrated European assembly process, because of tariff and non-tariff barriers and the timescales required for transport."

Although large manufacturers may have their own arrangements, smaller independent assemblers will likely need to work with sub-assembly in different locations or focus on local customisations.

The biggest bugbear is likely to be non-tariff barriers, rather than tariffs, making the UK a small, less attractive market.

Any deal at this late date, he notes, is likely to be bare bones rather than include comprehensive detail that will ease the path for trade.

Graham Jones, UK managing director of Exclusive Networks, says the VAD had already increased resilience and disaster recovery testing during Covid, including reconsideration of how best to motivate and manage teams.

Since then, they've worked to ensure all contracts cover both the UK and Ireland operations – but cost and red tape increases are expected, meaning the company will still have to work out exactly what and how much can be reasonably passed on to customers.

He says the uncertainty itself is adding to the impact – not least because customers continue to debate whether to move outside the UK to retain EU access, delaying some IT projects.

"As a business that exports 15% of our sales across the world, we need clear rules," Jones confirms, adding that it already buys from Taiwan and the US which should help reduce exposure to EU issues.

"Our government likes forms and red tape," he adds. "We have very active HR and logistics departments. We will look to automate what we can. Meanwhile, we see TV adverts telling us to prepare, but not what to prepare for. No-deal will likely just add to the hurt."

Alex Tatham, managing director at distributor Westcoast, highlights a 'new normal' of higher production costs and compliance procedures in the channel, which resellers too should prepare for by consulting resources such as the British Chamber of Commerce checklist, and registering for UK and EU Economic Operators Registration and Identification (EORI) numbers.

"We have assumed a 'no-deal/free trade agreement' all the way along," he adds. "As a critical part of the supply chain, we have focused on getting our processes right, storing commodity codes and checking potential tariffs, liaising with our suppliers on changes."

Westcoast has also bolstered freight forwarder relationships, bonded its warehouse, and increased stockholding and warehouse capacity over December and January and in Ireland and France, amid other actions such as recruiting additional international shipping staff.

"The main supply chain issues will be delays at port," Tatham confirms. "While these may be serious to start with, most customers have been relaxed about the extra time for imports. Westcoast is assisting customers with international shipping requirements." ...


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