Goodbye Brussels? What Brexit Could Mean for Procurement

Spend Matters welcomes this guest post from Gordon Shishodia, of GEP.

When it was announced in February that Britain would hold a referendum later in the year to decide whether it will leave or stay in the European Union, Europhiles and Eurosceptics alike were quick to vocalize the validity of their respective stances. Certainly, the decision will influence border security, question identity and impact the economy, and the headlines in the ensuing weeks have been filled with the “how wills” and “what ifs” regarding these issues. Rightly or wrongly, the impact on procurement hasn’t yet hit the headlines, but procurement professionals should be vigilant of the ways that Brexit could liberate or thwart their European category strategy.

The temporary labor category gives us insight on both sides of the coin. A category manager might be quick to point out that the E.U. has not solved all issues that are currently hindering the category from reaching best practice on a continent-wide basis. Consider managed service providers (MSPs), the system by which a company’s temporary labour force is managed by a third-party organisation. Multistate MSPs, which generate savings through spend visibility, competitive bidding models and procedural efficiency, have failed to take off in Europe as they have in the U.S., owing at least in part to the chasms in the regulatory landscape that exist from nation to nation when it comes to labour laws. For an organization that has as one of its pillars a commitment to ever-closer union, the E.U. has failed to deliver parity in terms of labour regulation. If it cannot even out this landscape, some temporary labor category managers in British procurement organizations would welcome the removal of the regulation imposed on them by Brussels and see a greater savings potential through a more flexible working model.

Others will be less optimistic: beyond the obvious implications of the re-introduction of tariffs on goods leaving and entering the U.K., one of the commodities that is set to be hardest hit by Brexit is that of workers, both permanent and temporary. The principle on the free movement of workers, which affords all E.U. citizens the right to live in the state of their choice, would cease to apply to the U.K. A number of various industries have voiced their concerns about the impact this would have on the talent pool. Industry leaders in agriculture have voiced particular concerns: a large percentage of the temporary workforce is recruited on a seasonal basis from other European member states. Even the National Health Service has entered the debate — Spanish, Irish, German, Polish and Portuguese are all in the list of 10 most common nationalities amongst NHS staff. Take away their automatic right to work in the U.K., and the act of sourcing talent becomes much more of a challenge, particularly given the diverse and multilingual skillsets that Brexit might wipe from the U.K. marketplace.

Beyond Britain, any procurement team reliant in some way on direct or indirect categories sourced from the U.K. will be consulting their procurement software, running spend analysis and examining alternative supply markets to determine the extent to which Her Majesty’s Revenue and Customs could morph what was once best practice into thoroughly sluggish. Interestingly, it could result in a more inward-facing eurozone as more category managers look to procure from alternative E.U. supply markets.

The hypotheses continue. But whether Europhile or Eurosceptic, British or not, procurement professionals should be mindful of Britain’s decision on June 23.

For more interesting thinking on procurement, visit the GEP Knowledge Bank.

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