Limits of a Strategy: Brexit vs COVID-19

Brexit contingency plans helped some companies and sectors fall on their feet when the COVID-19 pandemic hit, even though the government struggled.

Suddenly in mid-March 2020, Brexit began playing second fiddle as the world’s focus shifted to coping with the consequences of COVID-19. As economies shut down one-by-one, across Asia and then Europe, the economic shock to the UK had expected to come from Brexit came with the pandemic. Therein, however, lies the dim light of benefit for some sectors that had been vigorously planning for a no-deal Brexit and working out contingency plans. Still, opinions converge and are far from unanimous (as most things Brexit) whether it ultimately helped or hampered the UK’s response to the pandemic. While some companies certainly benefitted from diverting capital to build up stock, max out warehousing space and scale back on major investments – it might have led to catastrophic consequences regarding the government’s reaction as it had diverted valuable attention and capital away from its crisis response preparation. Though the same might now be true regarding the impending EU divorce.

Medicine

Controversially, one area that is said to have benefitted from comprehensive Brexit planning is medicines. Regarding the Department for Health (DfH), one Whitehall source said, “no-deal planning has probably been one of the most useful things we have done on this in the last six to nine months”, as they acquired a firm understanding of the supply chain structures and the pressure points, thus were able to quickly adapt and implement alternatives. Even though medicine shortages were not imminent, the government’s preparedness has come under scrutiny and criticism. The Guardian reports that as Brexit had been prioritised over the past months and years, training for key workers was disastrously neglected, the UK missed EU-level PPE purchases and eventually also halted parliamentary enquiries into preparedness for infectious diseases due to the 2019 election.

Food

Amid rumours that the country might have to eat Christmas dinners in autumn, supermarkets have had plans in place to deal with potential shortcomings in their supply chains and had prepared for eventualities resulting from a messy Brexit. A source from the Department for Environment, Food and Rural Affairs, stated, “In terms of the resilience in their supply chains, supermarkets are very much prepared for everything that’s going to come ahead due to all the no-deal prep that was in motion”; stores had mostly been able to replenish their stocks and shortages have likely been mitigated through long-term contingency planning for Brexit.

Automotive

An industry already under pressure due to changing consumer behaviour and requiring technology investments, it saw demand plunge during this once in a century battle against COVID-19. Said to be “on the precipice”, the auto industry brought back its Brexit preparation plans to cope with the wave of factory shutdowns over the month of March, where even a defiant few such as Aston Martin and McLaren had to follow suit. One of the most pressing issues, resulting from its just-in-time operation model, is that parts will continue to be delivered from China and elsewhere, even though the factories are shuttered. While this model works extremely smoothly in non-pandemic times and allows an average storage capacity of two days worth of parts, many carmakers, in anticipation of Brexit, increased their storage systems in external locations. Nissan, for instance, planned to store parts in the Port of Tyne, as well as leasing additional storage space near its Sunderland plant. Mini is reported to have hired a car park for lorries filled with parts. Bentley CEO Adrian Hallmark said their hard Brexit plans included the doubling and expanding of warehousing to boost storage and navigate disruptions to suppliers because of anticipated border checks.

Regardless of how unprepared the UK is reported to have been for the coronavirus itself, businesses that had been preparing for Brexit have had handy plans at their disposal when global supply chains broke down and the economy suffered under unprecedented conditions.

However, as much as those plans might have helped easing initial pains, the sort of disruption expected from Brexit had been different to COVID-19, which exceeds those plans in both scope and scale. This was further evidenced when the Chancellor’s first COVID package seems to have borrowed elements from Operation Kingfisher, an economic plan, “designed to help business through a period when their cash flow was at risk” and required multiple updates, demonstrating the limits and discrepancies of such blueprints in this extraordinary situation.

It is true to say that some businesses have been able to respond much faster and more effectively to the abrupt global economic shock caused by COVID-19 due to previous preparations; while others have been hit much worse – as most things Brexit.

What this will mean for the actual Brexit deadline is yet to be seen, but is perhaps best summarized by Joe Owen, Programme Director for the Institute for Government, “negotiations are grinding to a halt when they should be approaching full speed. […] The greater risk is that the government tries to conclude Brexit and tackle the coronavirus at the same time, and finds it can do neither well”.

Source: Transport Intelligence, June 2, 2020

Author: Dila Cebeci

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