John Glen on Brexit – Highlights from eWorld Keynote

John Glen, the Chief (“only”, as he put it) Economist for CIPS, spoke at eWorld recently on the topic of Brexit, not surprisingly.

He is a Remainer himself, he confessed, and there were a few comments that I would have liked to challenge him on somewhat (talking about full employment in the UK should always be accompanied by some comment about wage stagnation and immigration, I feel). But it was interesting, and I suspect useful for the audience to drive their thinking around the potential outcomes. It does all come back for procurement executives to “what should I do about it” though, and there aren’t many easy answers to that.

Without going through the whole presentation, which contained a good amount of hard facts and data, let’s just pull out a few key points. Much of the data comes from a recent CIPS survey of UK-based businesses, some of which are part of larger non-UK-owned firms.

  • Half of UK firms with EU suppliers said they would struggle to find the suppliers and skills they need in the UK. "We are Brexiting at a time of full UK employment” Glen said. So, there may be struggles with capacity in many areas as businesses look to source more from within the UK.
  • This transitional period also coincides with the “digitalisation revolution” – a big period of change for many firms, with disruptive competitors appearing. That is another reason why the next few years will be challenging.
  • “D1ND” means “Day one no deal” and it is a frightening thought. Glen talked a lot about the potential for huge queues at ports. Mathematical modelling shows that just a small increase in processing time for every truck quickly leads to huge delays (if all else is equal). But frankly… that can’t happen, the government would be fatally damaged within days. So, there must be solutions, even if it is just “open the gates” and let the trucks through for a while!
  • One obvious answer is for firms to hold more stock – but there are capacity constraints on UK warehousing too, he told us! Prices are rising for forward contingency or “swing” storage capacity.
  • 22% of UK firms say it is proving difficult to secure contracts beyond March 2019. That is interesting – I hadn’t really thought about that issue. But non-UK buyers will be rightly cautious I guess about entering into longer-term contracts.
  • One in ten UK businesses believe they will go bankrupt if goods were delayed by just 10-30 minutes at customs because of Brexit. This was the headline that I branded as stupid in a LinkedIn discussion. It turns out that this relates to the nightmare scenario of that short delay stacking up over days and weeks so that eventually we have 50 miles of queues at the ports! It does not mean just "every lorry is 10-30 minutes late", which is how it read. As we said, these huge delays just can’t happen. I think CIPS should have explained the meaning of that particular finding in a clearer fashion, or maybe they just were interested in the “clickbait” headline.
  • Of course, as Glen pointed out, there are particular problems for shipments of perishable goods. But a queue on the M25 can have serious effects now, never mind Brexit, as I remember from the day I was responsible for shipping tankers (insulated but unheated) full of liquid Anhydrous Milk Fat in from the Netherlands …

What does Glen think will happen in Brexit terms? He believes the UK will pay a divorce bill of £40 billion, and “freedom of movement is a non-issue," but it will be fudged on a "sectoral / need basis”.  In terms of Ireland, customs clearance away from the border is possible via a “technical solution” which he didn’t describe in any detail, but it is not the Boris Johnson “trusted trader” scheme.  And there will be a two-year transition period, during which jurisdiction of the ECJ will be fudged.

Finally, he believes we (business) should interact better with civil servants and politicians – business has not stepped up to the plate, he says. From what he has seen and heard companies are not giving support or even sitting in the room with government, which is worrying and rather strange.

So, a thought-provoking session, and Brexit is going to give many procurement people a lot more to think about in the coming months - whatever your personal views, that much is absolutely clear.

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