Brexit wins – what’s next for the procurement industry?
Milan Panchmatia, Managing Partner at 4C Associates has commented on the shock result that Britain is to leave the EU and the impact on the Procurement Industry
“Leave campaigners claimed that import costs will be significantly reduced (by as much as 8 percent) as we move to being a zero tariff regime. Possible. However, import costs are equally likely to rise or stay the same.
“Much of our imports come from the EU and these are unlikely to change. It’s unlikely that the UK will immediately move away from the international agreements that the EU has. It’s also likely that the administration of imports (everything from VAT to duty deferment) will become much more complex.
"What is certain to add more costs to business following this decision today, will be the associated decrease in migration and the increase in administration and regulation associated with business travel. There will be a clear increase in costs for products and services that depends on low skilled migrant labour (everything from contract cleaning to logistics and construction).
"This is also a decision that goes against the views of a large percentage of the procurement industry. Our recent monthly poll of 500 global procurement professionals, found that three quarters (79.5 percent) said they'd rather stay part of the European Union, 78.6 percent said they thought the procurement industry would be a harder sector to work in, 98 percent felt that leaving the EU would have a negative impact on procurement career opportunities in the UK.
"What was clear both from our poll and from conversations we have been having on a daily basis with clients and other procurement professionals is that leaving the EU presents new and unknown changes to business matters and it is likely that procurement functions within business will certainly see differences.
“Brexit will be the beginning of a long and unclear process and certainly not the end. It provides the possibility for the UK to run its own economy more closely in line with its own national interest. But it does not guarantee success.”
4C Associates is an award winning management consultancy specialising in procurement, savings delivery and managed services. Utilising market leading technology, processes and experts, the consultancy delivers best in class solutions to clients to a wide range of sectors including food & drink/retail; marketing; aerospace, defence and pharma.
EU and US agree end to Airbus-Boeing supply chain tariffs
The EU and US have agreed to resolve a 17-year dispute over aircraft subsidies, suspending tariffs on billions of dollars' worth of goods that have plagued procurement leaders on both sides of the Atlantic.
Under an agreement reached by European Commission Executive Vice-President Valdis Dombrovskis and US Trade Representative Katherine Tai on Tuesday, the tariffs will be halted for a period of at least five years.
It will bring an end to punitive and disruptive levies on supply chains that have little to do with the argument, which became embroiled in the trade battle. Businesses on both sides of the dispute have been hit with more than $3.3bn in duties since they were first imposed by the US in October 2019, according the EC.
The US imposed charges on goods upto $7.5bn in response to a World Trade Organisation ruling that judged the EU’s support of Airbus, its biggest aircraft manufacturer, unlawful. A year later in November 2020, the EU hit back. The WTO found the US had violated trade rules in its favourable treatment of Boeing, and was hit with EU duties worth $4bn.
In all the tariffs affected $11.5bn worth of goods, including French cheese, Scotch whisky, aircraft and machinery in Europe, and sugarcane products, handbags and tobacco in America. Procurement leaders on both sides of the fence were forced to wrestle with tariffs of 15% on aircraft and components, and 25% on non-aircraft related products.
Boeing-Airbus dispute by the numbers
- The dispute began in 2004
- Tariffs suspended for 5 years
- $11.5bn worth of goods affected by tariffs
- $3.3bn in duties paid by businesses to date
- 15% levy on aircraft and 25% on non-aircraft goods suspended
Both sides welcome end to tariffs
European Commission President Ursula von der Leyen branded the truce a “major step” in ending what is the longest running dispute in WTO history. It began in 2004.
“I am happy to see that after intensive work between the European Commission and the US administration, our transatlantic partnership is on its way to reaching cruising speed. This shows the new spirit of cooperation between the EU and the US and that we can solve the other issues to our mutual benefit,” she added.
Both aircraft manufacturers have welcomed the news. Airbus said in a statement that it will hopefully bring to an end the “lose-lose tariffs” that are affecting industries already facing “many challenges”. Boeing added that it will “fully support the U.S. Government’s efforts to ensure that the principles in this understanding are respected”.
The US aerospace firm added: "The understanding reached today commits the EU to addressing launch aid, and leaves in place the necessary rules to ensure that the EU and United States live up to that commitment, without requiring further WTO action."
This week’s decision expands upon a short-term tariff truce announced in March this year. The EC says it will work closely with the US to try and further resolve the dispute, establishing a Working Group on Large Civil Aircraft led by each side’s trade minister.
Airbus last month signalled to suppliers that post-pandemic recovery was on the horizon, telling them to scale up to meet a return to pre-COVID manufacturing levels. “The aviation sector is beginning to recover from the COVID-19 crisis,” said Airbus chief executive Guillaume Faury, adding that suppliers should prepare for a period of intensive production “when market conditions call for it.”