January 21, 2019 Industry news
In 2019, the United Kingdom (UK) is set to leave the European Union (EU) after 46 years of membership, but after almost three years of negotiation the UK’s exit strategy is still worryingly unclear
In recent months, the prospect of the UK leaving without a managed withdrawal deal in place to cement a working relationship with the EU has greatly increased. Commercial uncertainty has never been more profound or widespread.
At GS1 UK, we have been co-developing business standards alongside industry players for almost as long as the UK has been in the EU.
As an independent and neutral body, we have a unique position in the sectors we work across. The relationships we have with the retail and healthcare sectors, and the small-to-medium businesses (SMEs) that make up more than 80 per cent of our membership, allow us to take a broad-spectrum and unbiased view of the business landscape.
With that in mind, what do our heads of sector think a no-deal Brexit could mean for UK plc?
Healthcare
Glen Hodgson, head of healthcare at GS1 UK, gave us his opinion on the road ahead for healthcare.
A lack of qualified workforce in our hospitals
Approximately 145,000 people working in the national health service (NHS) report a non-British nationality. Of that number, 43 per cent come from the EU – some 63,000 key workers and 5.6 per cent of the whole NHS workforce.
A no-deal Brexit would mean the drafting of new immigration rules that could complicate the ability of the NHS to recruit medical staff from the rest of the EU. Furthermore, there could be a number of changes around mutual recognition of medical qualifications that would make transitioning into the NHS a complex and fundamentally undesirable experience.
Social care workforce depletion
As well as potential problems recruiting frontline medical staff, we could also see significant trouble concerning the number of professionals working the in UK’s social care sector.
Currently, EU nationals make up 5.4 per cent of the social care workforce. In the same way as medical professionals could be dissuaded from choosing to work in the UK, the 30,000 EU nationals working in social care today could be similarly discouraged from continuing in their posts. This could also dent the prospects of future employees wishing to enter the UK workforce in the short to medium term.
Disruption to medical supplies from abroad
The UK government has pledged to continue to recognise medicines that have already been approved by the EU in the case of a no deal.
While this would mean that EU-approved medication could still be sold in the UK, serious concerns have been voiced about the risk of disruptions to supply if there are delays at a hard frontier erected between the UK and the EU 27.
The government plans to stockpile up to six weeks of medicines in the event of no deal, but the threat of a shortage has underlined the problematic nature of goods crossing newly formed borders.
No access to European integrated drug and medical device regulation
As a part of the EU, the UK is a full member of the European Medicines Agency and contributes to the EU medicines regulatory network (EMRN).
In the case of a no-deal Brexit, the UK would cease to belong to the EMRN and Britain’s regulator, the Medicines and Healthcare products Regulatory Agency (MHRA), would have to take on the responsibilities formerly covered under the aegis of EMRN. This would require changes to British law via amendments of the Human Medicines Regulations 2012.
With regards to medical device regulation, no deal would mean that the UK would drop out of the EU committees concerned with medical devices.
Increased costs and distraction from service delivery
According to independent health think tank, the Nuffield Trust, the NHS could face more than £2bn of extra costs through 2020 as a consequence of a no-deal Brexit.
Everything from medicines and medical devices to bedding supplies could rise in price, wiping out the funding set aside for improving service delivery and enhancing standards of patient care throughout the NHS Confederation.
Retail
Jim Dickson, head of retail at GS1 UK, told us what the sector could be facing in the months ahead.
Disruptions to supply chains
Across the world, roughly 90 per cent of dry, non-bulk manufactured goods are transported by sea, meaning that ports and the transportation corridors that connect them to population centres are the vital organs and arteries of a functional nation.
A no-deal scenario would mean the establishment of hard borders around the coastal boundaries that separate the UK from continental Europe and Northern Ireland from Eire.
Numerous sources have already warned that the extra checks and balances that would need to be instated could greatly affect the flow of imported goods, especially fresh fruits shipped from southern European countries ports to UK ports.
Erratic exchange-rate movements
Speaking at the World Economic Forum in 2016, economist, Nouriel Roubini, said: “Markets tend to be manic depressive, going from excessive optimism to excessive pessimism.”
Uncertainty and lack of confidence are the main triggers of the excessive pessimism referred to – the Brexit process has been a perfect storm of both. Sterling has yo-yoed in price several times on the back of breaking news in the political realm and a no-deal Brexit could mean a momentous dive in the UK currency.
This could adversely affect the cost of supplies imported from Europe and the world at large, as well as causing domestic panic.
Access to labour
In the run-up to Brexit, UK retailers have reported a marked drop in EU nationals working in-store and across their supply chains.
According to a report published by Deloitte in 2017, 36 per cent of UK-based non-British workers were considering leaving the country in the next half-decade, with almost half of all high-skilled EU workers likely to leave by 2022.
As the appetite for blue and white-collar workers from the EU 27 weakens, the pool of talent which companies of all shapes and sizes can call upon will also diminish.
Increase in operating costs
As well as making access to labour more difficult, a no-deal scenario would add a thick layer of red tape to the current recruitment process.
The result of this would be higher costs to employers as a constricted talent pool would necessitate taking on more permanent staff on higher salaries than the previously relied-upon agency workforce.
Business owners would likely seek to pass on this on to consumers through price hikes, causing a vicious cycle of price increases that would act almost like a tax on both customers and employers alike.
Food standards legislation changing
Currently, EU regulations are responsible for defining many of the baselines for UK food standards, including packaging and labelling, compositional standards, consumer protection and animal welfare.
In the result of a no-deal Brexit, the UK government has committed to rolling over the EU-based provisions pertaining to food standards as part of the Withdrawal Act and through statutory instruments where necessary. This will not be an instant fix.
There are likely to be substantial relabelling cost for companies and the potential of sinking food safety standards as the UK scrabbles to secure trade deals with countries that have lower legal requirements.
SMEs
Raj Burman, head of SME at GS1 UK, gave us his take on the implications for SMEs. 
The perils of red tape
Any trading friction or the imposition of tariffs in the event of a no-deal Brexit could result in a large proportion of SMEs going out of business or being forced to displace their operations to an area outside of the UK, either partially or entirely.
No deal means planning for the most disruptive possible scenario. That includes the drastic measures that relocation, increasing prices or outsourcing jobs overseas might mean. If companies are not already wargaming for these eventualities, then it could already be too late.
Sterling fluctuations
The upshot of the announcement of a no-deal Brexit may well be a nosedive in the value of the pound and months of volatility to follow as events play out in the political sphere.
None too soon, SMEs are waking up to the need for currency hedging and the employment of risk management strategies to reduce the unpredictability of their cash flows and protect underlying business margins.
As result, companies will need to shift time and resources which would have been dedicated to promoting growth, onto managing day-to-day operations. This is likely to end up in stagnation or regression for many fledgling or middleweight companies.
Skills shortages
As with all retailers, SME owners are concerned with what a no-deal Brexit might mean in terms of freedom of movement and access to talent.
For smaller enterprises, the concern is even more acute, as potential shortages in areas such as IT that are required to upscale growth, or inaccessibility to lower-paid skilled labour that is carried out by EU workers, could severely damage a leaner organisation.
On the plus side…
It might not all be doom and gloom. A fall in currency value after a no-deal Brexit will be a good thing for boosting export numbers abroad and could well catapult companies that would have been satisfied with a domestic reach onto the world stage.
A new viewpoint of the global markets through the window of trade deals yet to be brokered is both a daunting and encouraging opportunity. The Centre for Entrepreneurs recently published statistics that presented 2018 as the strongest ever year for start-ups, showing that the possibility of no deal has not dampened the spirits of the next generation of business owners.
Some final thoughts…
Gary Lynch, CEO of GS1 UK, gave us his assessment
of how standards could be a unifying force in the face of uncertainty.
By all indications, Friday 29 March 2019 will be a seminal date in the history of the United Kingdom.
It is a date that has been known since March 2017, when the British Parliament invoked Article 50 of the Lisbon Treaty to leave the EU.
Since that time, no deal has always been an outside possibility – now it is a distinct possibility. And we should prepare for such an event as if it were a certainty.
Amid socio-political turbulence and the conceivable breakdown of relationships between friendly states, at GS1 UK we can reflect on the powerful uniting factor of standards – standards that were created to facilitate the ease of trade between nations through a common language.
Even in the eventuality of a no-deal Brexit, our data and communication standards will support the flow of trusted information. When coupled with the right technological solution, they will also support faster and more efficient checking of goods at newly established borders, reducing friction where processes were once frictionless.
At a time when political events threaten to test alliances and rend the commercial order, a bedrock of internationally accepted standards might be the common reference point needed to maintain momentum in trading relations.
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