The critical imports and supply chains strategy: Brexit 2.0

Written by
Terry Murphy
February 2024

The Critical Imports and Supply Chains Strategy

Terry Murphy, a consultant at Hatmill, shares his views on the introduction of The Critical Imports and Supply Chains Strategy together with the impact of Brexit 2.0 and what it will mean to businesses.

The UK Government has introduced the first Critical Imports and Supply Chain Strategy, which was launched in January 2024. Its key objectives are to build resilient supply chains and safeguard critical imports. This means:

Imports of critical goods for the NHS and UK manufacturing will be protected from global supply chain shocks, safeguarding business and consumers and boosting the economy.
The new Critical Imports and Supply Chains Strategy forms key part of government work to back business and grow the economy, helping UK companies build strong and resilient supply chains for vital goods and avoid dependence on protectionist or coercive states.
Cutting-edge research will be used to map the impacts of shocks on supply chains, such as those caused by the Covid pandemic and the war in Ukraine and will help understand how the UK can secure the goods we need in future.

The definition of critical goods is not absolute, with an indicative “includes goods which are critical to ensuring the UK’s economy, essential services and national security. These range from the semiconductors essential to modern electronics to the medicines that are used daily within the National Health Service (NHS).”

The strategy is a five-pronged approach, built around supply chain analysis, removing barriers to imports, responding to supply shocks and cross-industry collaboration:

Making the UK government a centre of excellence for supply chain analysis and risk assessment
The government is committed to enhancing their understanding of the flow of critical imports into the UK, publishing more analysis and making better use of techniques to map future supply chain scenarios.
Removing critical import barriers to support the UK’s business-friendly environment
This will allow businesses to report barriers to imports that government can then work to resolve. It will also mean businesses will be able to access the tools they need to source new suppliers and better access finance schemes.
Building the UK’s response to global supply chain shocks
The government is aiming to be able to better forecast disruptive events and develop crisis response measures. They plan to do this by publishing regular updates on specific risks and expanding existing programmes of stress testing.
Ensuring the UK can adapt to long-term trends
Next steps in this area make up the largest bulk of the government’s strategy. The idea is that being proactive is more effective than reactively putting out fires and will ultimately build much stronger resilience. For example, the government will help businesses to diversify their suppliers and strengthen the UK’s domestic capability to produce critical goods. They will also make us of our international bilateral partnerships to solve evolving supply challenges.
Expanding collaboration between government, business and academia
The government will launch a new Critical Imports Council, bringing together government and businesses in critical and growth sectors. They will also enhance their advice and guidance offerings.

The Strategy is a comprehensive and encouraging document, encompassing the key challenges facing global supply chains in 2024 including analysis of:

Geopolitical tensions
Climate change
Potential diversification of supply
Maritime chokepoints
Supply chain shocks

The Strategy also proposes putting the UK at the forefront of international engagement on global supply chain resilience as well as expanding collaboration with domestic businesses and academia.

The objectives, proposed levels of commitment to engagement and collaboration and the initial analyses in key supply chain challenges are all refreshing, necessary and very welcome.

When will the new Critical Imports and Supply Chains Strategy need to be initiated to support our critical food supplies? If you’d like to discuss the likely impact of any of these issues on your business, please get in touch.

Brexit 2.0

However, as the Critical Imports and Supply Chains Strategy is introduced, we are also facing the final stages of the trade border restrictions as part of the UK’s exit from the European Union.Described, almost lightly, as Brexit 2.0, these changes introduce stringent additional restrictions, particularly on fresh food and plant importers. Health certificates will now be required on EU goods ranging from cut flowers, to fresh produce including meat, fruit and vegetables.According to the BBC’s Economics Editor, Faisal Ismal

It is the final piece of the jigsaw puzzle of the changes necessary after the UK's exit from the EU's customs union and single market.
The most high-profile changes for food and plant product imports from the European Union started to be phased in on Wednesday, 31st January, after a series of delays.
This will mean significantly extra red tape. In particular, an expensive veterinary certificate will be legally required with consignments of fresh food and plant imports from the EU. These are a requirement from 00:01 GMT on the 31st January, but will not be subject to actual checks at the border for another three months.

It’s fair to say that Brexit 2.0 is not being met with the same level of support as is the Critical Imports and Supply Chains Strategy.The likely cost to the UK has been estimated between £330m and £500m, with The Institute for Government fearing supply chain disruption and shortages of goods on supermarket shelves. The Grocer suggests shelf life could reduce by as much as a fifth with perhaps some deliveries from the European Union being unsaleable. The requirement for a veterinary health check to be carried out in the EU on every consignment of meat set to enter Britain is leading to the industry body, the British Meat Processors Association to raise concerns over the potential lack of veterinary capacity. Doubts have also been flagged over the location of the new facility for physical checks, which is 22 miles from the point of entry at Dover.

The likely cost to the UK has been estimated between £330m and £500m, with The Institute for Government fearing supply chain disruption and shortages of goods on supermarket shelves.

Summary

It’s clear that the development and launch of the Critical Imports and Supply Chains Strategy is a welcome addition to how supply chains within and outside the UK are considered and supported. While the range of commodities affected might, at the moment, seem restricted, with medicines and technological products specifically considered, the acknowledgement of many of the challenges faced and a commitment to greater collaboration are both timely and positive.

However, given the likely impacts of Brexit 2.0, it does seem as though there are two, almost conflicting strategies for the UK’s supply chains. Brexit 2.0 will add considerably to the already challenging import/export environment. Industry bodies welcomed the delay in implementing these changes, which have taken five years, but still question whether the arrangements are fit for purpose. We could be secure in our availability of semi-conductors but exposed to food shortages and further price rises. It leaves us with one outstanding question…….

When will the new Critical Imports and Supply Chains Strategy need to be initiated to support our critical food supplies?

If you’d like to discuss the likely impact of any of these issues on your business, please get in touch.

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