Now that the dust has settled on the UK’s departure from the European Union (EU), we are in a stronger position to identify the long-term structural issues that will face us down the line and make more informed decisions about the most effective solutions.
First, however, it’s important to bear in mind that the list of challenges facing us today will not be the same as the one we confront next week, or even tomorrow. One of the first lessons 2021 has taught us already is that firms operating in Brexit Britain are set to face continued and unprecedented change which could make effective solutions a moving target.
Some of the emerging issues were easier to predict than others, however with the implementation and phase-in of the new trading arrangements between the UK and EU there are sure to be points of friction which will emerge over the course of the coming months and years. The role of Northern Ireland in these discussions is particularly pertinent.
But what of the unfolding challenges we already face? These include understanding how to practically implement many of the rule changes triggered by Brexit, especially where policy or government advice is being developed in real time. Add to that the sheer volume of paperwork that businesses must now handle, particularly when exporting to the EU. Medium- and long-term planning has also become more difficult given that many businesses no longer have the same supply chain and cost base as they did on 31 December 2020. These challenges are evolving against a shifting background of uncertainty over future trading relationships and, indeed, the wider economic outlook.
Weighing options, seeking solutions
A growing number of businesses are now looking at the viability of restructuring their supply chains to reduce their dependency on UK distribution points and infrastructure replacing them with EU alternatives. But what exactly does restructuring and relocation involve and what are the risks? EY is currently working with a number of clients to optimise their supply chains for a post-Brexit environment, and fast-tracking results by using established methodologies and tools.
The weight of the new regulations is already having a measurable effect on businesses and the people who run them. We have already seen the impact of this burden in areas such as customs clearance and associated documentation, master data, and integration with external partners. There are other areas where businesses have yet to feel the impact. Examples include regulatory reporting, VAT and finance, where issues may only come to light once returns have been filed and checked by relevant authorities. The delayed risks associated with failing to fulfil extra legal and regulatory obligations correctly is another incentive to address the bureaucracy overload sooner rather than later. Meanwhile, the UK are phasing in the implementation of import checks and declarations on exports from the EU over the first six months of 2021, which means that, for importers, the full extent of the changes is not yet visible. With an eye on minimising the fallout, EY is currently working with clients to automate these processes and declarations through a technology-based managed service offering, EY Ocean.
While some businesses are considering restructuring or relocating, others are absorbing the workload and cost of handling the paperwork burden. But how long can they continue to tie up resources in commoditised, repetitive tasks that add no value? The work associated with filing import and export declarations alone is already placing many businesses under even greater pressure. Rather than keeping this work in-house, some businesses are outsourcing it to customs brokers – another expense.
Here, technology-based managed services, such as EY Ocean, offer a possible route round this problem by reducing the administrative burden and eliminating dependency on third parties. Given that the flow of new regulations is certain to continue, this type of long-term, scalable and automated solution looks increasingly viable.
What about the long term?
We are at the start of a story that will continue to change and develop for the foreseeable future. Different storylines will come and go – uncertainty will be one of the few constant plot themes. What happens, for example, when businesses come up against new laws and regulations governing the movement of talent, the flow of data, or product regulations? And how will the C-suite respond to the fact that Brexit is already hitting profits? Putting the future in perspective, Ben Robinson, Director in Technology Consulting at EY concludes: “With the right thinking and advice, successful businesses will learn to adapt to the short- and long-term changes triggered by Brexit. Of course, the success strategy for every business will look different. But in many cases, technology can be highly effective when it comes to managing a range of business-critical areas – from automating repetitive tasks to optimising extended supply chains.”