British exporters face losing contracts, being forced to slash prices or denied payment if Brexit causes delays to deliveries of goods, according to a survey of supply chain managers.
A one-day delay at the border would see 20% of EU businesses surveyed push their UK suppliers for a discount on their order, while 11% of UK exporters are expecting to have their contract cancelled in the event of 24-hour delays.
More than half (60%) of EU-based respondents would cut ties with UK suppliers if the Brexit delays stretched beyond two weeks.
Additionally, in the event of extended delays, a quarter of EU businesses would withhold payment until after goods arrive, thereby reversing the trend towards an open account model many UK-EU exporters are currently operating on in order to maximise working capital.
The stomach-churning reality facing UK exporters outside the EU was laid bare by a survey of 1,749 supply chain managers from the UK and EU by the Chartered Institute of Procurement & Supply (CIPS).
The survey was conducted in February with 1,602 UK respondents and 140 EU respondents.
CIPS represents purchasing and supply management professionals through a community of 200,000 members in 150 different countries.
With only two weeks left before the UK is due to leave the EU and no sign of a deal being reached before the March 29 deadline, the number of EU businesses that have already switched suppliers to avoid uncertainty has almost doubled since October to 38% of those surveyed.
In the context of a no-deal Brexit scenario, 60% of UK supply chain managers admitted they would not be able to comply with some of the EU’s customs requirements such as applying for an economic operator registration and identification (EORI) number, thereby leaving them unable to trade with the EU.
An EORI number is needed to move goods into or out of the EU as it allows the relevant government bodies to identify the parties involved and collect duty on the goods.
Only 39% of UK respondents said they would continue to trade with the EU regardless of delays or barriers to entry.
CIPS economist John Glen, says: “The financial cost of Brexit indecision will not be paid in Whitehall, but by Britain’s businesses. Britain’s supply chains are so finely balanced, that even a temporary delay at the border after March 29 will see UK businesses paid later and paid less for their goods. These costs, combined with a lack of investment, will likely reduce the number of exports coming out of the UK and result in a reduction of the UK’s competitiveness on the international stage.
“If the UK does stumble out of the EU without a deal next month, the majority of British businesses would not even be able to file the right paper work to get goods across the border. Whatever happens in the coming days, Britain must still invest in the skills, relationships and technology to take its new place in Europe and beyond.”
UK government is expected to hold a series of votes this week to determine whether to accept Prime Minister Theresa May’s proposed deal and also whether to apply for a delay to the Article 50 deadline. The government is today rejecting widespread reports that the ‘meaningful vote’ due on Tuesday will be downgraded to an advisory vote, which would lessen the result’s power to change government policy if May’s deal was rejected again.
The current timeline means that UK business may find out on Thursday whether they will gain an extension to their timeline for Brexit preparations or if they should brace for a sudden crash outside the world’s largest single trading bloc from April.