Brexit - Driving business transformation

With trade into and out of the EU accounting for over 50% of the UK’s overall international trade, the size and scale of customs and trade compliance, its cost, value, and strategic importance for businesses has grown considerably. With the North West boasting a large manufacturing, industrial, retail and consumer products base, for many, particularly those with closely integrated UK and EU supply chains, business leaders are still working through how they respond to and navigate significant impacts, such as:

• Instances of goods being held up at the border on both sides of the Atlantic.
• Challenges with broker capacity to make customs declarations, and cost implications as some brokerage firms increase prices to leverage on increased demand.
• Trade partner pricing and customs role negotiations.
• Determining customs tax and cost forecasts.
• Implementing strategies to manage the cost impact.
• Strains on resource, technology and operations through managing an increased customs and trade compliance landscape.

The need to focus on customs compliance, and getting it right, is becoming even more important owing to UK customs, and tax recovery in general, being high on HMRC’s agenda.  Overnight, from 1 January 2021, customs tariffs went from being a 25% to 100% revenue source for the UK. At a time when the UK is looking for ways to recover from COVID-19 and Brexit spend, which according to the Institute for Government is expected to be £148bn¹ and £8.1bn² respectively, customs is likely to become a revenue recovery focus area and, by proxy, a risk area for businesses that do not want to be hit with unexpected customs bills. 

Against that backdrop, many business functions have seen an increase in the areas assumed to fall under their remit and are being asked to input more frequently on business strategies, particularly on production, procurement and distribution models. This comes at a time where input demands are increasing but departmental budgets especially in tax are flat or falling. In Deloitte’s recent Tax Transformation Trends Survey, tax leaders said that simplifying data management (53%) and moving to lower-cost resourcing models (51%) have to be prioritised if tax is to become more proactive at delivering strategic insights to the business – something that is quickly becoming critical for customs and global trade.

Whilst the above is problematic, there is a clear opportunity for department leaders to use Brexit to address some of these issues. We have seen an upward trend in Brexit being used to obtain executive level buy-in and budget for projects to roadmap new operational structures, in order to add much needed strategic value to customs operations, run more efficient supply chains and increase compliance in a smart way.

When working on customs and global trade operating model transformations, we embed three key factors into the approach:

1. Assessing current state: Welcome the chance to take stock on what the current operating model is, identify gaps, bring different functions together – get their views on what works well and challenge what they think needs to change, define clear impact costs and recognise what is already available within the business to leverage. By taking the time to map the ‘as is’ position, you will be in a good position to get key stakeholder buy-in, articulate a clear business case at senior level and develop a future state design that is viable.
2. Identify where you want to be against different maturity models: There is not one size that fits all. When designing a ‘future state’ operating model it is important to establish where the business wants to be against different levels of maturity, recognising that it might not be viable or desired for all areas to be ‘best in class’. Sometimes, interim designs are needed to go from current state to the ultimate desired state depending on timescales, cost/benefit, buy-in and budget.
3. Document and agree a clear implementation plan: Once the desired design is agreed, preparing a detailed implementation plan will give a clear framework to take concept into reality. Making sure there is effective change management, knowledge transfer (where talent roles are being redefined), achievable milestones, clearly defined actions and responsibilities should ensure a smooth implementation that does not disrupt compliance activities and business operations during the transformation.

By working through these stages a business should be well positioned to make impactful and optimal changes to customs and global trade operations that respond to current Brexit disruption and proactively deliver more strategic insights for growth and efficiencies, mitigate future impacts and increase compliance in a cost efficient way.

If you are interested to read more on Brexit, its impact and how it can define future plans, please go to our page Brexit: Define your future | Deloitte UK for more information. For more information on our NW practice, including insights into our global market activity please click here    

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References

¹ https://www.instituteforgovernment.org.uk/explainers/cost-coronavirus

² https://www.instituteforgovernment.org.uk/explainers/brexit-spending-government-preparations