Tag Archives: EU Procurement

Brexit: What Happens Now?

Brexit is complicated and it’s very, very messy. And what happens during the next couple of years will be determined by a number of political factors…

At last month’s CPO roundtable Anand Menon, Director of the UK in a Changing Europe based at Kings College London, spoke to us about the long-term causes of Brexit and their future implications.

“Hand on heart I don’t know [what’s going to happen]” he said. “If I could answer that I’d be rich and famous!”

It’s the most uncertain moment in British politics since World War Two and what’s striking is that, two years on from the referendum, nothing has been decided.

A key reason for such uncertainty is the nature of the referendum itself.  As Anand explained, the referendum packaged so many different options and outcomes into a binary choice: leave or remain.  No one understood quite what they were signing up for and since the result, Brexit has largely been defined in terms of the different adjectives applied to it; black Brexit; white Brexit; hard Brexit; soft Brexit; white red and blue Brexit… the list goes on.

“Brexit was a vote against globalisation and it was a vote against the economic status quo. Subsequently, it’s interesting  to see that the South of England has noticed the North and we’ve had a chance to address issues that never got air time under old centrist, liberal politics.

“More profoundly, the referendum and its outcome have taught us about us. In the same way that Trump has been a wakeup call for the U.S, the fallout from Brexit should be a wakeup call to our politicians to think about the real problems confronting the country. ”

And how to best to manage negotiations as we ready to leave the EU.

Does the UK want to establish a relationship with the EU similar to that of Norway’s or maybe more like a more distant partner?

Anand admitted that due to Brexit being such a complex and all-consuming process, there is no avoiding it being a messy one at that! What happens during the next couple of years will largely be determined by the following three political factors:

  1. Theresa May

The UK Prime Minister relatively quickly defined what she meant by Brexit (leave customs market, end free movement etc) and her position has remained relatively unchanged since. Whilst she is unpopular with many in her party, it is unlikely her critics will choose to get rid of her yet. As long as she in place, she is a powerful force for stability.

  1. The Conservative Government

There are a significant number of Tory MPs who want a much softer Brexit than the Prime Minister is proposing so it’s possible they will vote against May’s Brexit deal. However, if May loses this vote there is no question that she has to go; after all, her whole mission as Prime Minister is Brexit. If that happens, the Conservative Party will either elect a new leader or the UK will face a new general election. And the one thing no Tories want is another general election.

  1. The Labour Government 

In the last general election, Labour picked up votes from both remainers and leavers. As such, the party have been careful to keep their Brexit policies ambiguous. Whenever Corbyn speaks about Brexit, he speaks in ambiguities.

Does Anand believe there is any chance of a second referendum? “The beauty of Britain at the moment is that any outcome is possible – I can imagine us crashing out with no deal or a great deal but I can also imagine a scenario where the first referendum is overturned.”

“No one knows what would happen to public opinion at this point – we could vote Brexit again. Or, imagine second time around the UK votes to remain 52-48 per cent. We’ll find ourselves in a political groundhog day. There would need to be a huge swing in vote for it to carry much weight.”

Ultimately, Anand warns, the real danger for the UK’s economy is that the negotiations go pear shaped, the UK crashes out of the EU in March 2019 and they end up with no wiggle room to extend the UK’s transition period.

His advice to procurement organisations trying to prepare? Plan for a World Trade Organisation outcome from 2021 – “That, I think, is the most likely outcome.”

How The ‘Brexit’ Could Change Public Procurement

Although the UK referendum isn’t until June, an increasing number of reports are now discussing the potential impact of the ‘Brexit’ on public procurement.

On June the 23rd, UK voters will go to the polls in order to decide on the UK’s future as part of the EU. The referendum promises to polarise opinion, much like the Scottish Independence Referendum in 2014, but there is an increasing focus on what it will mean for public procurement in the UK, as well as supply chains crossing UK/European borders.

EU Procurement Directives, required to be taken into account for all public procurement activity within the community, are widely recognised, and even more widely discussed. While there are critics of the Directives, many believe that they are key to maintaining a fair and equitable process in sourcing activities.

Brexit Impact

Although the EU procurement directives receive a lot of bad press, they were set up with a specific purpose in mind – elimination of trade barriers resulting from discriminatory and preferential procurement practices. It was hoped that this would assist countries across the EU realise savings in public procurement, and create a level of transparency in activities.

Further changes have been made to the procurement directives in the past 12 months, aimed at simplifying and modernising the public procurement process. The directives also have their supporters, who argue that they help to maximise competition, achieve value for money, and enable social benefit and innovation in purchases.

There are also arguments made that, had the UK not joined the EU Common Market, now the European Union, it would have still ended up with public procurement regulations that would not have been vastly different to what exists now.

The impact of a UK exit, or ‘Brexit’, is still largely unknown, and can only be estimated in terms of costs to both the UK economy and UK businesses. However, from the point of view of procurement regulations, some parties are stating that it wouldn’t have an immediate impact on current UK procurement rules.

In fact, any changes to procurement law in the UK public sector would be low on the Government’s priority list. And if there were changes, the rules would end up being very similar (where they have been successful), or some industries, like agriculture, would have to maintain EU standards in order to continue doing business on the Continent.

Supply Chain and Procurement Costs

But what about costs to import goods and the wider supply chain impact in the event of the ‘Brexit’? Well, there still isn’t a consensus when it comes to this either. Some reports show a potential drop of 8 per cent in import costs, but that this could potentially be offset by rising labour costs, partly due to a loss of access to low cost, or cheaper, labour.

Open Europe, a think tank, predicted a worst case scenario of a 2.2 per cent fall in UK GDP, but a potential 1.6 per cent growth in GDP, by 2030. There are also concerns that any possible saving the UK might see in tariffs and not paying money into the EU, would be swallowed up by having to cover subsidies paid to certain industries by the EU.

For both UK and European businesses with supply chains operating across borders, there would be a loss in freedom of movement, both goods and services, and labour. Some goods could be subject to as much as 35 per cent export tariffs, while pan-European partnerships could be lost or cancelled.

While a ‘Brexit’ is by no means a certainty, both British and European companies should start preparing for it happening. Actions like monitoring alternatives suppliers, assessing logistics decisions, and work with existing suppliers to put deals in place, all help to reduce the risks that businesses are exposed to.

What are your (non-political!) thoughts on the ‘Brexit’? Is your business likely to be exposed to the impacts? Let us know in the comments below.

As ever, we’ve been scouring the ‘net this week for top headlines to enjoy with your morning tea or coffee…

Using Waste to Plug Power Gap

  • Using the energy from processing waste at anaerobic digestion plants in the UK could help to solve the country’s energy issues
  • However, there are warning that if the AD technologies aren’t promoted better, they could be lost before they even manage to prove benefits
  • Despite favourable tax breaks, environmental benefits and cost savings, the UK lags a long way behind European countries such as Germany in the number of AD plants it has
  • There are currently 434 plants in the UK, some of which support large retailers (Sainsbury) and manufacturers (Diageo) in their operations

Read more at Supply Management

Brazilian Retailer to Clean Up Supply Chain

  • Brazil’s largest grocery chain has pledged to stop selling beef reared on deforested land in the Amazon rainforest
  • Retailer, Pão de Açúcar, also promised to stop buying beef produced by workers living in slave-like conditions, or cattle produced on land grabbed from local communities
  • The new purchasing plan is set to be in place by the 30th of June, at which point the business will stop dealing with suppliers linked to deforestation and modern slavery
  • The firm operates 832 stores across Brazil and has pledged to help its suppliers improve their practices ahead of the June deadline.

Read more at Thomson Reuters

Love Your Waste to Save Money

  • New reports have shown that Scottish households waste the equivalent of 26 million beef burgers (2,900 tonnes of beef) each year in food wastage
  • Zero Waste Scotland has launched a campaign aimed at reducing this waste by using leftovers as part of other dishes, something that could save each household up to £460 per year
  • Confusion over dates on labels, caution about meat safety and worries over freezing and reheating can lead to good meat being thrown away even thought it is still fine to eat
  • In February, Scottish environment secretary Richard Lochhead pledged to cut food waste in Scotland by a third by 2025, to save businesses and households at least £500m

Read more at Supply Management

2016 Enviro Challenge Launched

  • Enviro Challenge’s challenge day for 2016 is set to take place next week in the Waikato, Auckland, Bay of Plenty, and Central Plateau regions of New Zealand
  • The day is aimed at inspiring schools to develop sustainability and leadership skills in high school students
  • Students are also asked to develop, or continue developing, a project for their school with measurable outcomes, and encouraged to think long term
  • Students will be working on initiatives that will have ongoing positive impacts on their schools and their communities, which this year include renewable energy and biodiversity

Read more at Sun Live