The B Word

John Robeson discusses the implications of Brexit on Osborne’s supply chain. Prior to joining Osborne, John worked as a consultant to a number of construction businesses, before being appointed as the Group Head of Supply Chain.

“Osborne as a business turnover equates to £300 million.  With the ever increasing uncertainty of whether the United Kingdom will be leaving the European Union and the prospect of leaving without a deal is as real as ever, businesses are preparing for the worst.  In preparation, Osborne has put clauses into the majority of its contracts so it will not have to pay for damages for problems caused by Brexit. However it is important for us to understand how Brexit will affect Osborne’s supply chain.

Brexit is an interesting phenomenon – it is a difficult one to unpick because as a contractor out there bidding for work, we’ve seen a mixture of genuine concern and a little bit of opportunism whereby some potential customers may be thinking, is it worth hedging our bets and if we threaten to cancel schemes because of Brexit, might we force a downturn in price? From a supply chain management perspective, we have conducted a lot of engagement with our core supply chain in order to get as clearer picture as possible of the likely impact of Brexit on them.

What this engagement has highlighted, is how detached, we as main contractor’s have become from tier 2 and 3 supply chain and how little we (and many of our tier one suppliers) know about the origins of our materials and products and how they are sourced. While there is concern around the exchange rate or the continuity of goods and services between UK and Europe, I think the reality is that the majority of European suppliers will want to preserve good quality business relationships with UK firms and Brussels making doing business with the UK more difficult would be somewhat cutting off their nose to spite their face, potentially creating a vacuum that  non-European suppliers will be happy fill.

Post Brexit, it will be compulsory for firms to pay VAT upfront on all goods imported from the EU. “It is obviously harder for smaller firms because a lot of these additional costs get pushed down the chain” says Osborne CEO, Andy Steele. In order to avoid VAT increases and lack of available building materials, firms are stockpiling materials, the implication of this is affecting businesses cash flow.

Another key risk often cited is reduced availability of skilled labour post Brexit. Research conducted by PBC Today found that non-UK workers equate to approximately 28% of construction workers within London and 8% of all workers within the UK. Under the proposed outcomes for Brexit, migrant workers will be stripped of their right to free movement and subsequently, their automatic right to work in the UK, potentially leading to a shortage of skilled workers within the industry. However, our own 2018 survey of our top 50 suppliers (by spend) tells a very different story with 80% saying they envisage minimal impact on their capacity to deliver their services with the remaining 20% expecting moderate impact. Even more interesting is that supply chain confidence has actually improved since our original survey in 2016, when 47% of suppliers asked, expected moderate negative impact.

Brexit is a case of the only certainty being uncertainty so our approach will continue to be conservative in managing our existing supply chains and bold in developing additional supply lines.”

John Robeson is Group Head of Supply Chain at Osborne.