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Brexit creates supply chain uncertainty

Bart Perkins | Aug. 17, 2017
Monitor Brexit closely to avoid having your supply chain disrupted. If you don't, Britain’s exit from the EU might not be the only exit in your future.

Airlines.  EU-based airlines have not needed regulatory approval to fly between European airports since the 1990s.  In addition, the US and the EU created open-skies agreements to ease regulation and promote the movement of people and goods between the US and the EU.

With the maturation of the air traffic network, Britain has been promoting an EU-wide air traffic control system.  Unfortunately, Brexit decreases the likelihood that the new system will become a reality.  All airlines and their customers have been hoping that this new system would reduce the cost of flying within the EU. Now airlines and customers are concerned that Britain and the EU could impose new border taxes or screening procedures.  Depending on new Brexit agreements, airlines could change routes or modify pricing to fly to Britain.

Energy.  Power grids are complex supply chains, requiring constant attention to balance the demand for electricity with power being generated throughout the day. Since Britain is part of the European electric grid, the British power plants are able to sell surplus energy and buy energy when not enough is being generated. 

On March 27, 2017, British nuclear regulators granted permission for construction to start on the Hinkley Point C nuclear power station (HPC) in Somerset, England.  EDF, a French utility is providing a large amount of the construction money with the understanding that some of the power will be sold to other parts of Europe. Unfortunately for the project, Austria’s anti-nuclear government is contesting the plant to the European Court of Justice. If Britain loses, HPC may not be able to sell subsidized surplus electricity into the European grid.  As long as Britain is part of the EU, the case will be settled on the basis of EU contracts and treaties. Once Britain withdraws, new contracts and treaties could be used to determine how the case is resolved.

Pharmaceuticals. Pharmaceutical companies expected a “unitary patent system” across the EU by 2018.  The system would allow a company to obtain a single European patent and not be required to obtain separate patents for each individual country.  The unitary patent was to be enforced by an intellectual property court in Britain specializing in drugs and chemicals.

Pharmaceutical companies operate complex supply chains that track the movement of every container of medicine from the plant floor until it is delivered to the customer.  Under the unitary patent system, pharmaceutical companies could rely on a single set of rules to manage their supply chain.  Once Britain withdraws, the unitary patent system may not become a reality.

 

Preparing for Brexit

The best move you can make now is to prepare for what could be massive changes to the IT architecture and supporting infrastructure. Here are three steps you can take now:

 

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