The Supply Chain Matters blog provides a sidebar commentary relative to heightened global trade tensions, specifically this week’s new development of a provisional Brexit agreement being produced for approval.

The Supply Chain Matters blog has been featuring our look back at 2018 Predictions for Industry and Global Supply Chains that were published at the beginning of this year. Our just published Part Two look-back, included Prediction Six, a prediction focused on how aggressive U.S. trade and tariff actions as well as heightened global trade tensions have already had an impact on the tactical and strategic landscape for U.S. and indeed global manufacturers.

One specific area our prediction touched upon was the impact of Brexit and the March 2019 deadline for the United Kingdom’s exit from the European Union.

Skepticism relative to whether a new trade pact could be negotiated between UK and EU factions and ratified by all of the parties by the early 2019 deadline have languished for most of this year with little meaningful progress. EU and UK based businesses increasingly faced deadlines as to making strategic and tactical decisions relative to insuring timely supply network flows or factoring any implications of added tariff, labor or currency implications in landed costs. U.S. businesses linked to the UK were no exception.

As we were penning our look back, with little signs of definitive urgency, we were about to declare that the March 2019 deadline was looking more and more to be either a hard or no Brexit outcome.

We then had to pause because of the new development occurring this week, namely that at long last, a 500 page provisional agreement over Brexit has been produced.

As we scan all of the various UK and EU news outlets, the current picture can best be described as political chaos. While the full details related to this provisional agreement are still being absorbed by a select group of UK political leaders, reports indicate proposals related to the Irish/Northern Ireland soft borders and an interim arrangement to keep the UK within the current EU’s customs union after the March deadline for what could be a 21 month “transition” period.

Yesterday, Prime Minister Theresa May reviewed the secured agreement with her Cabinet in was reported as a grueling 5-hour meeting. At its conclusion, the Cabinet granted its approval but the fallout was the tendered resignation of at least three prominent Cabinet members including Dominic Raab, the Brexit Secretary and Shailesh Vara, the Northern Island Minister. In a brief address to the nation, the Prime Minister indicated that difficult decisions now need to be made and there is a possibility of a “no deal” scenario without such decisions.

Chief EU negotiator Michel Barnier told reporters in a press conference that he recognized that the “path is still long” in getting agreement on both sides of the channel and called on the UK parliament to “assume its responsibility”.

As the Prime Minister begins the process of securing expedient Parliamentary approval, the political uproar centers on whether the EU has de-facto provided a “veto” over when the UK can leave the temporary customs union which once again inflames both sides of the Brexit or Remain elements. Northern Island interests are not obviously happy and threatening to withhold approval, as is potential members of the Prime Minister’s own party along with opposing political parties.

Other reports indicate that EU leaders are planning an “emergencyBrexit summit in Brussels in late November to hash out the multi-member approval process or deal with any UK fallout.

We do not in any way profess to be adroit in reading the UK political landscape nor are we a politically focused blog, but it would seem that the Provisional Agreement might well have been an attempt to provide industry supply and customer demand networks some basis of interim planning beyond March 2019. Yet, the political firestorms of Brexit are again ignited and who knows were all of this ends-up.

With four months remaining, hard decisions need to be made as to material flows into and out of the United Kingdom. Some are already being made . Beyond provisional safety stocks, one would suppose that the leading scenario is indeed leaning toward either a hard or no Brexit.

The winds continue to grow turbulent.

 

Bob Ferrari

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