Brexit’s Impact on the Horizon
What it Might Mean for Consumer Goods Companies
The countdown is on: The UK could officially leave the EU on March 29, 2019. Over the next year, what can consumer products companies do to mitigate the effects of Brexit?
Potential outcomes for a “hard” Brexit:
- Market access and tariffs. In any Brexit scenario, there likely will be an increase in the costs associated with the movement of goods between the UK and EU due to tariffs—which will either be passed on to consumers or will negatively impact a company’s profitability. CP companies should outline how these additional costs will be dealt with to help ensure that their goods remain competitive in the EU market.
- Location of company headquarters. For large multinational CP companies who face a number of regulatory issues across the world, Brexit could very well be treated as a “local” issue affecting a single market. Whereas UK-based companies with cross-border supply chains will likely face a much more complicated situation.
- Supply chain. As noted, UK-based companies with a multi-country supply chain are likely to be impacted more than countries that have a simpler and UK-specific supply chain. And Brexit is likely to make the movement of consumer goods through existing supply chains more complex, costly, slow, and difficult to execute.
- Talent. Since many EU nationals will likely be impacted by Brexit, and some are already leaving the UK due to uncertainty about their positions, companies will likely need to plan for a scenario in which there’s a depletion of talent. CP companies may also want to consider the extent to which they’re willing to sponsor visas or work permits or EU nationals in the UK.
- Product labeling and safety. UK-based CP companies will likely have to assess the benefits of continuing to adhere to EU standards for product labeling and safety. On one hand, since EU standards are among the strictest in the world, UK companies may want to continue to EU standards to help ensure continued access to EU markets. However, post-Brexit, there could be a gradual dilution in standards for any number of reasons—from lowering production costs to changes in market communications.