Yet another chapter in the chaotic Brexit story has been written, with the scheduling of a general election in Britain on December 12, to determine the fate of Prime Minister Boris Johnson and his embattled government. Depending on the outcome, the question of whether the country should leave or remain in the European Union might once again be put to a vote by U.K. citizens. Already, however, uncertainty caused by the ongoing political crisis is having a serious impact on business. In this conversation with SupplyChainBrain editor-in-chief Bob Bowman, Jennifer Biseglie, chief executive officer of Interos, warns that small and mid-sized suppliers serving large manufacturers could be among the biggest casualties in the event of a no-deal Brexit.
SCB: How do you assess the Brexit situation as it currently stands?
Bisceglie: A lot of unknowns. There's a lot of blocking and tackling, and from the companies that I've spoken with, everybody's planning for all three possible exits: soft, hard and no-deal.
SCB: Let’s assume a no-deal Brexit. What are some of the impacts that you see on supply chains in the U.K. and Europe?
Bisceglie: There are a lot of costs to be incurred that companies weren’t expecting, especially in the shipping and transportation industries. You also have a lot of concerns in the big manufacturing industries, especially automotive. Ford is estimating costs of something like $1 billion if its business is disrupted. Pharmaceutical is also a big unknown. A lot of big companies are coming out and saying how much money they might lose, but they have no idea what will happen to smaller companies and side suppliers that might go out of business.
SCB: What about finance and banking?
Bisceglie: They’re a major concern. It’s a big thing for the EU and the U.K. from investors’ standpoint. Banks will have to alter some of their asset and wealth-management offerings. Just the uncertainty drives up costs and stops a lot of investments, hurting not just the EU and U.K., but the rest of the world as well.
SCB: What are some other sectors that are in danger of being disrupted?
Bisceglie: Import and export businesses will also be affected. Then there are the defense industries, which are very staid in their ways. Defense contractors need to know their suppliers, and the uncertainty over a deal or no deal just breaks things in two. Again, it’s not just the suppliers they know, but also the ones underneath that they can't see that’s are going to experience a ripple effect and more uncertainty. There will be a grace period of almost a year, but after that, there's still going to be a lot of cleanup that happens.
SCB: How would distribution patterns need to change? Would companies selling in Europe need to set up separate networks in the U.K. and EU under a no-deal Brexit?
Bisceglie: It’s happening now. Manufacturers aren’t just looking for alternative suppliers; they’re actually setting up secondary infrastructures. There’s a huge cost to that. A lot of larger companies operate in multiple countries, so they might not feel the impact as much as the smaller businesses that are underneath them. Subcontractors will have to find a different way to stay in the game. Some sources of supply could actually shrink, because they can't afford to switch to alternative sourcing or shipping routes. So I would expect you'll see a consolidation of markets.
SCB: What should companies be doing today to prepare for the outcome of Brexit, regardless of what it might be?
Bisceglie: They should be looking for alternative sources and having conversations, not just with their direct suppliers, but with sub-tier suppliers as well. It’s never the company or country that you’re [directly] dealing with that's a concern. In the States there’s a lot of talk of “buy American,” yet those companies aren’t really making their products here. The same thing is happening everywhere in the world. We hear about the big companies on the news, but it's the smaller businesses — the mid-tiers and smaller suppliers from all over the world — that are going to feel it just as strong, if not stronger.
SCB: So you're saying that companies need to get a handle on all of the smaller partners with which they're dealing, and understand what the full implications of a no-deal Brexit are going to be?
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