Since Brexit, the British economy has taken quite the downturn, only growing 2% in 2021. While any growth is positive, the British economy continues to struggle under the weight of supply chain issues.

The COVID-19 pandemic has contributed to the supply chain backlog wreaking havoc on the British economy. However, Brexit is the main contributor. The changes in immigration and trading laws continue to impact the public sector in many ways. The public sector is facing large labour shortages and major drops in export demand. Adding pressure are the excessively long queues at ports across the U.K.

Here we’ll break down how Brexit has caused the supply chain backlog that continues to impact the public sector.

What is Brexit?

Put simply, Brexit refers to the withdrawal of the United Kingdom from the European Union (EU). The EU is an economic and political union, made up of 27 countries. Member states can trade with one another easily and their citizens to move easily between the countries, to live or work.

There are several reasons for the shift in the UK’s foreign policy. Creating a new ‘Global Britain’, through forging new relations with non-EU countries is one. Another reason is the EU’s annual membership fee. The UK was charged approximately ￡9 billion. However, the main goal is to develop new inward-looking economic structures to drive the British economy.

 The referendum, or public vote, held in mid-2016 resulted in a win for the ‘Leave’ side. However, the win was very close – 52% to 48%.  

Unfortunately, the bold move has come with several challenges and setbacks.  Since formally leaving, the British government has faced new trade restrictions and tighter immigration laws and losing sovereign credit ratings. As a result, the UK’s public sector is straining under pressure.

The impact on the public sector has caused severe supply chain delays, culminating in larger issues and major backlogs.

How Has Brexit Caused the Supply Chain Backlog?

Brexit, thanks to the new labour and immigration laws, resulted in what many call a mass exodus of foreign nationals. According to the Office for National Statistics, 1.3 million non-UK-born residents left the UK between 2019 and 2020. 

As a result, the UK now faces a significant labour shortage, exacerbating the strain on the UK’s supply chain. The worst hit sectors were haulage, food and drink, hospitality, and construction. 

The British government has used these shortages, more specifically the shortages of HGV drivers, as the main reason for the supply chain delays. The driver shortage has had a serious knock-on effect. Various sub-sectors have been impacted, from overflowing ports to Amazon warehouses filled with goods that can’t be delivered.

But the labour shortage crisis isn’t the only reason why the UK is facing such supply chain issues.

Post-Brexit trading rules have only added the pressure. Being a non-member, the UK can no longer benefit from the EU’s single market or customs union. Ultimately, meaning goods now have to undergo extensive customs and regulatory checks.  

These new checks don’t only slow down workflow, but also add more costs, while increasing complexity in cross-border trade. Many see these checks and bureaucratic red tape as baffling and debilitating.

What About the Pandemic and Global Supply Chain Issues?

Only adding to the pressure, were the COVID-19 protocols placed on companies and workers, across the world. The pandemic has also played a role in the UK’s staff and labour shortages.

The worldwide COVID-19 pandemic resulted in millions of EU nationals returning home. Brexit, however, could have contributed to these high numbers.

The restrictions put in place during COVID-19 also halted training in various sectors. The result, is a very low influx of newly skilled employees, creating an even larger gap in the labour force.

The pandemic has also wreaked havoc on the global supply chain. As a result of the many lockdowns across the world, work halted, causing major backlogs in the global supply chain. Most countries, inlacing the UK, are struggling to rectify these issues.

In conjunction with Brexit, though, it has created a somewhat negative outlook for the British economy. Many firms continue to believe, that despite some increase in production, the UK supply chain will still face issues throughout 2022.

In the first quarter of 2022, the UK economy grew by 0.8%. Unfortunately, the ongoing war in Ukraine has created another bump in the road.

The war, alongside Brexit and COVID-19, has caused inflation to skyrocket and the sterling pound to hit a major low.  

The British Government’s Plans

While there remains a steady, negative outlook, the British government has several plans to try to mitigate the many issues.

Brexit has resulted in an export deficit, but it’s allowed for negotiations for new trade new deals with non-EU countries. Australia, New Zealand, and the US are some of the countries that the British government have begun negotiations to try to meet their domestic demand.

First world countries aren’t the only ones in the UK’s government’s sights for new trade agreements. Their Developing Countries Trading Scheme (DCTS) aims to increase free trade between the Global South, too.

The government also aims to diversify their trade services. They made it compulsory for public sector organisations to advertise their procurement opportunities to both public and private companies.

In the same vein, the EU has begun offering new tenders and procurement opportunities to non-EU member states. All an attempt to mitigate the global supply chain backlogs, and to meet the demand for goods across the world.

The British government has also implemented major changes to the Contract Procurement System. This was formally regulated by the EU, and now better suits British interests. This redesign opens the door for public businesses to take advantage of public sector procurement contracts. It also allows businesses to be more creative on how they can win new tenders and procure new contracts.

The major driver shortage contributing to the many supply chain issues is also being handled. The government aims to make it easier to obtain a lorry driving licence, and during the various lockdowns, they eased some rules to allow for longer delivery trips.

Should You Be Worried?

The public sector has been badly hit by Brexit and COVID-19. The continued supply chain backlog has caused many companies to doubt the future,

However, the government’s new plans aim to ease the pressure on the public sector, and eventually rectify supply chain issues.

With the changes to the procurement contract system, why not register with us? Here at Supply2Defence, we help you find more opportunities, helping your business grow.