Can green Brexit benefits offset the costs of leaving?

Leav­ing the EU meant the end of free trade between Britain and its Euro­pean neigh­bours, along with an end to the free move­ment of goods, ser­vices and peo­ple. For many com­pa­nies, espe­cial­ly man­u­fac­tur­ers that rely on Euro­pean part­ners for com­po­nents, this has led to inevitable sup­ply chain upheaval.

John Breen, geopo­lit­i­cal con­sul­tant for strate­gic advi­so­ry firm Sibylline, says the main chal­lenges for man­u­fac­tur­ing busi­ness­es in the wake of Brex­it include trade bar­ri­ers, exac­er­bat­ed labour short­ages, increased logis­tics costs and tar­iffs.

“Brex­it is hav­ing a neg­a­tive impact on UK export-focused indus­tries like man­u­fac­tur­ing,” says Breen. “The new cus­toms rules as of Jan­u­ary 2022 have increased oper­at­ing costs for the UK’s man­u­fac­tur­ing indus­try.”

Increased costs and paper­work are the main effects on sup­ply chains for man­u­fac­tur­ers who import com­po­nents from the EU, as well as those who did enjoy free access to EU mar­kets for export. Breen says this is sig­nif­i­cant because the EU accounts for 42% of all UK exports, so extra costs on the dis­tri­b­u­tion side of the sup­ply chain are unavoid­able for British man­u­fac­tur­ers.

“In goods alone, the major­i­ty of the UK’s top 10 export and import part­ners are in the EU,” says Breen. He adds that the UK ser­vices sec­tor “has not expe­ri­enced as much dis­rup­tion to date as Lon­don remains an impor­tant Euro­pean finan­cial hub”. 

A recent report on tack­ling car­bon emis­sions and trade poli­cies, by the UK Trade Pol­i­cy Obser­va­to­ry and Cen­tre for Inclu­sive Trade Pol­i­cy of the Uni­ver­si­ty of Sus­sex Busi­ness School, rec­om­mend­ed a com­pre­hen­sive approach to sup­port­ing decar­bon­i­sa­tion on a glob­al lev­el. Both the UKTPO and CITP sup­port low-car­bon sup­ply chains. At gov­ern­ment lev­el, the report rec­om­mends green invest­ment, cli­mate finance, tech­nol­o­gy trans­fer and coop­er­a­tion in the devel­op­ment of inter­na­tion­al stan­dards for reduc­ing emis­sions on sup­ply chains. In the mean­time, though, British com­pa­nies are tak­ing mat­ters into their own hands to reduce the car­bon foot­print of sup­ply chains out­side the EU sin­gle mar­ket.  

Tim War­ring­ton, CEO of robot­ics com­pa­ny Ser­vicer­o­bots, says the firm sources all its com­po­nents with­in the UK. “And if we can’t source from with­in the UK, we try to man­u­fac­ture com­po­nents our­selves, which means a low car­bon foot­print,” he explains. As well as the green ben­e­fits, he reports long-term finan­cial and qual­i­ty con­trol ben­e­fits from keep­ing sup­ply chains with­in the UK. “If there are any qual­i­ty issues, we can make adjust­ments very fast, which saves in waste,” he says.

“After the ini­tial set-up of tool­ing, pro­duc­ing parts our­selves is around 80% cheap­er than buy­ing them in,” he explains. “It helps us cope with costs incurred by Brex­it. Com­pa­nies that take this approach are help­ing to increase man­u­fac­tur­ing in the UK to cope with demand.” War­ring­ton describes oper­at­ing out­side the EU as “chal­leng­ing because of the usu­al red tape to get parts but, like any­thing in busi­ness, you just have to get over the hur­dles and make the most of the pos­i­tives, such as increased demand for parts made in Britain, which are now hard­er to source in Europe.”

Kanzen Skin­care also reports advan­tages of not rely­ing on EU sup­pli­ers. Like Ser­vicer­o­bots, David Con­nor, joint CEO of Kanzen Skin­care, says the com­pa­ny sources “100% of our com­po­nents from the UK. As a start­up, it was vital for our devel­op­ment and brand to act fast and talk to UK sup­pli­ers if we need them,” he explains. Keep­ing sup­ply chains for com­po­nents with­in the UK is also impor­tant for the com­pa­ny to meet its sus­tain­abil­i­ty goals. “We’re car­bon-neu­tral – and the first cos­met­ic com­pa­ny to achieve plas­tic neu­tral­i­ty in oceans,” he says. “Work­ing with UK man­u­fac­tur­ers has had a huge impact on our car­bon-neu­tral sta­tus.”

Con­nor agrees with War­ring­ton that costs may be linked to keep­ing sup­ply chains with­in the UK. For Ser­vicer­o­bots, it was ready­ing the fac­to­ry to make more parts onsite, while Kanzen says that UK man­u­fac­tur­ers can be more expen­sive. 

“But as a pre­mi­um skin­care brand we’ve fac­tored in these costs – and the speed and ease through­out the sup­ply chain out­weigh the change in costs,” explains Con­nor. He is clear that keep­ing sup­ply chains with­in the UK has also helped man­age costs incurred by Brex­it. “We find it eas­i­er to manoeu­vre reg­u­la­tions in the UK since Brex­it. Our only chal­lenge is the export of goods to Euro­pean coun­tries because the export reg­u­la­tions are tighter plus we pay dou­ble for reg­is­tra­tion of prod­ucts,” he says.

Com­pa­nies such as Ser­vicer­o­bots and Kanzen Skin­care are tak­ing the ini­tia­tive in green­ing sup­ply chains by bring­ing them with­in the UK’s bor­ders wher­ev­er pos­si­ble –  although cost ben­e­fits can vary and dis­tri­b­u­tion to the EU is more expen­sive than it was. Pri­vate com­pa­nies can – and often do – take direct and pos­i­tive action before leg­is­la­tion is in place or gov­ern­ment cli­mate poli­cies have caught up with the need for change.