The Supply Chain Matters blog updates readers on the current state of affairs relative to the planned exit of the United Kingdom from the European Union, or Brexit.
Our last update penned on November 15th indicated that a tentative agreement had been reached among the two parties and that Prime Minister Theresa May had managed to secure her Cabinet approval of the agreement, despite the public resignations of three Cabinet ministers including the Minister for Brexit.
As we pen this update, the Prime Minister has now gained the approval of all 27 European Union members on the Withdrawal Agreement and Political Declaration on the Future EU-UK Relations, which serves as the Brexit divorce pact.
Months of difficult negotiations have led up to the draft agreement and a nebulous set of pledges concerning a future trade and customs relationship with the bloc, both of which were officially adopted in Brussels on Sunday. The agreement of the 27 EU representatives came very swiftly, immediately after the call for the vote with little added debate, a likely sign of the take-it or leave-it stnce from the EU.
Jean-Claude Juncker, the president of the European Commission, the bloc’s executive arm, indicated to news media that: “It’s the best deal possible. The European Union will not change its fundamental position.” He further clarified: “It’s not a moment for jubilation nor celebration; it’s a sad and tragic moment.”
That 585-page treaty outlines Britain’s outstanding payments to the bloc of around $50 billion, the rights of European Union citizens in Britain, and how to prevent physical checks on goods at the frontier between Northern Ireland, which is part of the United Kingdom, and Ireland, which will remain as part of the EU. The termed soft border remains a political flash point as is a provision for an up to 20-month moratorium where the whole of the United Kingdom would remain in a European customs union, while Northern Ireland would abide by more of the bloc’s economic regulations.
The picture of political crisis across Britain that we described 11 days ago appears to be the same. With the country scheduled to leave the European Union on March 29, 2019, the Prime Minister appears to be relying on giving the British Parliament a stark take-it or exit without any deal choice in the pending vote of Parliament scheduled in December. Parliament’s rejection of the Brexit plan on the table risks an unprecedented political crisis that could lead to various indeterminate outcomes and implications for trade and commerce.
Industry Supply Chain Quandary
For various industry supply networks that extend to and from the UK, the current political situation presents a clear dilemma. The March 2019 milestone is within the quarterly sales and operations planning (S&OP) windows for supply network processes, and contingency decisions are already being made relative to material and component flows, including added safety stocks or alternative cross-country transportation flows. As many have noted, without some sense of agreement on April 1 customs policies, there is a real risk for significant disruptions in material flows in automotive, commercial aerospace, consumer goods, healthcare and other industry supply networks.
Undoubtedly, the current brinkmanship of Brexit will be one of the notable supply chain management storylines of 2019, depending upon the upcoming vote of Parliament, and the actions of supply chain teams in the coming The headline could either be adequate contingency planning or structural industry supply and demand network disruption.
Bob Ferrari
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