The rhetoric from both sides is now over. The deal has been made (mostly), and whatever your opinion on that deal, it now falls to the businesses of Britain and Europe to create a place for themselves in a new world.
After every negotiation comes a rebalancing. Suffice to say, however, it has been a bumpy start to the UK operating outside of the European Union.
In the midst of the negotiation, Boris Johnson proclaimed that the UK and her businesses would ‘prosper mightily’, deal or no deal. In these early weeks, Britain’s isolation has been anything but splendid. The feeling amongst her businesses is anything but mighty, and prosperity seems rather a long way off.
Even our special relationship with our allies across the Atlantic doesn’t seem so special in 2021.
British businesses have been hit hard by the immediate challenge of Brexit.
Stories through the early weeks focused largely on fishing. Supply chains for fish and lobster were suspended in Boulogne-Sur-Mer. And, bound in Brexit red-tape, 30 years of carefully crafted relationship have been undone, with the prospect of next day delivery of langoustines and scallops from Scotland into French markets now little more than a fantasy.
The story of a UK lorry driver accosted in a Dutch port and the seizure of his ham and cheese sandwich, while seemingly farcical, demonstrates the scale of the fundamental change in the UK’s relationship with Europe. Dutch and English television showed a posse of customs officers in hi-vis jackets delaying the English trucker for the contents of his packed lunch.
The quote from one port official caught expertly on camera was,
“Welcome to the Brexit, sir, I’m sorry.”
Closer to home, in Prime Minister’s Questions, Boris Johnson described ‘teething problems’ with the new Northern Irish border when referring to the flow of goods between each nation’s ports. In disgust, Iain Paisley of the DUP claimed the statement was an insult to everyone’s intelligence.
At a political level, the change in relationship status is starting to have very real consequences. Where once Britain and the EU were once so BFF and ‘Facebook official’, it now seems as though the UK is being politically ‘unfriended’.
This week, Clement Beaune, French Minister for European Affairs, called for an end to English being used as the primary language of business in Europe, in the interests of championing ‘linguistic diversity’.
Compensation for Scottish fishermen, or not
Critically Boris Johnson (when fielding a question on the challenges faced by Scottish fishermen at French customs), explained that every business that was currently experiencing difficulties would be “compensated”.
Then, just a day later, he made a political U-turn that has drawn the ire of both industrial and political powers in Scotland.
Supply chains have never been more exposed
Supply chains have always been very much the ‘backstage area’ of the UK’s economy and its relationship with the European Union. Vital to economic prosperity and trade, people have always been more interested in immigration, for example, rather than the mechanics of business and markets. Now, however, with all the drama and fanfare of a new Netflix documentary, the supply chains of Britain’s businesses have been thrust into a media and political spotlight.
As leaders in supply chain finance, our market experts continue to hear from clients about delays to both imports and exports, and the issues are not immediate fixes. Things are very different now, as one French fisherman put it,
“Sending fish to London used to be as simple as selling it down the end of the road, now it’s like sending fish to planet Mars.”
– Pierre Haem, L’Argonaute
For all of its column inches and soundbites in the international news, supply chain has not become the new sexy. It is the same old integral part of a successful business.
The stakes have been raised, but the principle is still exactly the same.
The challenges are new, but the requirement for a business to have a robust diverse supply chain hasn’t changed at all.
Those businesses that can establish (or re-establish) and maintain their supply chains now will endure through this transitional period.
To be adaptable, to capitalise on a new opportunity, or to secure a new relationship, working capital (cash) is vital. Many new suppliers will require cash upfront to secure goods, or to negotiate a better deal. We continue to hear stories about challenging payment terms from suppliers as close as Europe and as far away as China.
The creation of new international borders as a result of Brexit has led directly to much uncertainty, delay, and supply chain disruption.
There is much business to be done, as markets are rebalanced and new relationships established.
One thing, however, is certain. In a new and changed European market, in the context of disruption to international supply chains, cash will remain the most important tool in any finance director’s armoury.