The impact of Brexit in the constantly evolving economic landscape has caused an increasing period of uncertainty, forecasted to last for no less than a decade.
The biggest concern currently is on the impact of tariffs on the businesses competitiveness and of border regulations for industries involving short shelf-life of goods and just-in-time production.
UK and EU relationship
The United Kingdom has an important role in the global economic picture, and imports from abroad represent roughly 70% of FTSE 100 revenues. Exports in the highly diverse service sector represents double the value of UK’s goods export, and 8% of the intangibles value worldwide.
This is one of reasons why the area on which Brexit will have its major effects is the import-export of goods, not only globally, but increasingly with the EU. In fact, the EU represents the biggest partner for the UK businesses, with roughly half of the UK’s imports and exports with the EU, directly or as intermediary with third parties.
Concerns of the UK businesses
The main concerns of for UK businesses fall into four areas:
- Tariffs on goods imported and exported
- Since we mainly deal with non-European suppliers, tariffs might not impact us as deeply as they would for businesses perpetually dealing with European suppliers.
- Delays in the deliveries
- When having to go through the UK borders (if the supplier is European and the recipient in the UK), the procedure and timing of imports and exports will be heavily influenced. Our business will be influenced when dealing with the European suppliers importing in the UK, and the European customers buying goods from the UK.
- The increase of prices on goods might represent a problem if the suppliers are in the UK. According to the past analysis on the suppliers, 60% of our quotations have been derived from UK businesses, hence hedging against inflation would mean finding new suppliers, or subsidiaries of the UK businesses in foreign countries.
- Loss of strength of GBP against foreign
- Unexpected or negative outcomes of Brexit might lead GBP to lose value against the EUR, the USD and the other currencies we deal with. The only protection would be introducing fixed exchange rates with the customers, keeping the rate hedged against any fluctuation of the pound.
Uncertainty surely also develops on the way Brexit will unfold. The tight integration of British supply chains with the EU will increase the difficulties in taking a step back and having the two parties to build looser relationships among each other. Even if a Brexit deal would happen in the short time, uncertainty about the UK and EU regimes might persists for even longer than a decade.
Global Synergy Resources is prepared for Brexit.
Our business structure is built to face and mitigate any changes in the market, always providing our customers with the best solution, tailored for their needs.
By Ottavia Cannavo, Financial Analyst, Global Synergy Resources, London 11/10/2019