Supply chains lengthen ahead of expected increase in Brexit bureaucracy

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Almost four in ten Irish businesses are reporting delays in their supply chain as a result of Brexit, while a significant proportion have changed their export strategies in anticipation of an expected swelling of Brexit-related bureaucracy over the course of next year.

According to professional services firm Grant Thornton, the UK’s departure from the EU is already having a substantial impact on Irish businesses, raising concerns that delivery times will deteriorate further as a series of new border requirements are introduced from October.

Some 37% of companies surveyed for Grant Thornton Ireland’s International Business Report said their supply chains were experiencing longer lead times, with 22% having to recruit alternative global suppliers and 21% saying they had recruited alternative suppliers in Ireland.

Almost a fifth – 17% – said they had outsourced or hired people to deal with the extra bureaucracy, and 51% identified Brexit bureaucracy and regulations as a constraint to growing their business.

“It is likely to get worse over the next 12 months as the UK has used a light touch so far,” said Jarlath O’Keefe, Indirect Tax Manager for Grant Thornton Ireland.

Prior notification requirements

From October 1, agricultural and certain other products imported into Britain will be subject to pre-notification requirements, although the UK food industry has been pushing for a reduction in the proposed 24-hour notice period at four o’clock.

From 1 January 2022, exports will require both EU and UK safety and security declarations, creating a “double whammy” duplication of bureaucracy on products, while from From March 2022, border controls will begin on live animals and certain plants and plant products.

“Irish businesses may need to have a customs officer in place at a UK port to ensure it is running smoothly, and that will be an additional cost,” Mr O’Keefe said.

The timetable for new checks, which Westminster postponed earlier this year, could be pushed back again, he noted. In the meantime, the findings of Grant Thornton’s survey suggest that many Irish businesses are already taking steps to reduce their exposure to the heavier trade regime with Britain.

Although a third of companies say the UK remains the key territory for targeted business growth, Germany was identified as the key territory by 17% of companies and 16% of companies named the US as the main market for potential export growth.

“over-reliance” in the UK

Mr O’Keefe said the ‘past overreliance’ on the UK was ‘no longer a reality’ for two-thirds of Irish businesses, with some firms also exploring growth opportunities in China and in France.

“Companies are looking to expand into other markets as they recognize the UK cannot continue this light touch indefinitely,” he said.

Other non-European markets – such as the United States, where individual states apply different rules – “pose their own challenge”.

Senior executives from some 63 Irish companies were interviewed for the report, part of Grant Thornton’s research of 5,000 mid-market companies in 29 economies, conducted in the first half of 2021.

Despite the ramifications of Brexit and the business difficulties exacerbated by the Covid-19 pandemic, three quarters of Irish businesses say they are optimistic for the next 12 months.

“Businesses remain optimistic about the future, but it is clear that Brexit and the pandemic will impact trade and growth going forward,” said Janette Maxwell, associate director of tax at Grant Thornton Ireland.

“International sales provide an opportunity to mitigate the financial impact of these global events, and as the world opens up again, companies will continue to look overseas to expand their business, whether in increasing their exports or sourcing from more efficient suppliers.”

British companies, meanwhile, are increasingly creating depots in the EU to circumvent Brexit demands, while struggling to overcome domestic supply chain problems caused by a severe shortage of lorry drivers.

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