PCIAW®ONLINE Brexit Trade Deal Series
On 1st January 2021, the UK officially completed the transition period for the country’s exit from the European Union.
PCIAW®ONLINE opens with the second piece in our Brexit Trade Deal Series with Simon Hunter Esq, M.B.E. B.A. (Hons), FIoD, C.Dir, CEO of Hunter Apparel Solutions Limited, to discuss the implications of Brexit for Northern Ireland and the professional clothing industry.
Simon was awarded the “UK Overall Director of the Year” by the Institute of Director’s Awards, London and is a multi-award winner in the professional clothing and technology industry. Simon is also a founding Board Director of PCIAW®.
Whilst businesses may welcome the certainty provided by a free trade deal being reached, companies need to adapt to the new rules and processes in order to continue operating.
What was your initial reaction to the finalisation of the Brexit trade deal with the European Union?
Relief! What was agreed was much better than a no-deal scenario. Although clearly there are some non-trade barriers now in place regarding paperwork and administration.
I am not a fan of anything that slows down trade, so it is now important that both sides respectfully ease into the deal and behave reasonably to avoid further frictions that could occur down the line.
I understand both sides of the Brexit opinion barrier and don’t agree or disagree completely with either side. Whatever side you voted for – we are where we are – as they say – and everyone in the UK needs to work hard to help UK plc make the best success of this outcome as possible. We need to nurture good relations with our suppliers and clients throughout the EU and show them the friendship they deserve from all British people.
PCIAW® can play an important role in this due to the global reach of its growing members. My wish is for PCIAW® to become even more global as a result of the deal.
What impact do you think the implementation of the UK’s new trading relationship will have on Hunter Apparel?
Hunter Apparel is starting a 2021-25 plan to scale our business significantly. We will be exporting more and growing domestically organically as well as acquisitively. In 2020, we set our path and invested £1 million in the business. We grew staff by 38%; invested in training, new robotic machinery, other new factory and warehouse kits, developed our premises and invested heavily in IT. We wanted to make sure we were in the strongest possible position for whatever 2021 threw at us regarding Brexit, recession in the UK, or COVID-19.
I believe in both the micro-sense (Hunter) and the macro-sense (UK plc) that there will be threats and opportunity. Human beings have a great tendency to view everything through the prism of their own bias. I think experience and age allows us the opportunity to grow in that regard – we can develop the ability to see both sides of the coin and look for the positives and mitigate against the negatives of any situation.
Hunter is a UK company registered in Northern Ireland. This puts Hunter in a somewhat better position in some regards versus other UK companies that are based in GB. What I mean is that the NI protocol gives us “unfettered” access to the market in GB and this was an essential matter for all NI business people, but we also get easy access to the EU market because we will follow EU rules on goods. This means that I can import from the EU and sell back into the EU with no new interference at all, whereas GB-based companies will have additional costs and processes to make such trades possible.
A lot of GB-based companies will find trade with the Republic of Ireland more difficult whereas Hunter in NI will not, so this is a real advantage. This is vitally important as NI is the only part of the UK with a land border with the EU i.e. Republic of Ireland.
It is important to remember that through 30 years of terrorism in my country, we have lost over 3,000 lives. With a population as small as NI (less than 1.9 million), the effect is massive: it crippled the country in every way, including the economy.
Our economy has suffered massively from under investment because of The Troubles, every family here has suffered in some way. It is vitally important that NI receives some additional funding and gets corporation tax down to 11% or less so we can compete more evenly with the Republic of Ireland. Hopefully, this long-promised local government objective will happen soon and NI will have a chance to rebuild. Hopefully, huge areas of NI will be declared as “Free Ports” to give an additional boost to our trading capacity and ability.
I think Hunter will have the ability to rapidly grow our EU export trade while still growing our business across GB in 2021 and beyond. Determined business people are not derailed by events for long.
What work was undertaken by Hunter Apparel in preparation for the new trading rules and was the preparation enough to ensure a smooth continuation in your operations? What advice would you give to other businesses adjusting to the new trading regulations?
- Assess our position in reference to risks across contracts, legislation, bidding forward, treasury management, staffing
- Recruit a senior manager for Brexit
- Purchase a new IT system with specific functionality to make import and export more straight forward even in a no-deal situation
- Develop a new 5 year business plan to scale the company
I think we have done enough to manage with this deal, even a worse position than the current deal – remember, the deal could fall apart at some point in the future. So while I would have preferred to spend my time and that of other staff in different ways, we got there. So far we have no negative effects in January 2021.
My main advice for GB-based suppliers is to make sure you have the process and paperwork to continue the ability to trade with NI and the EU. There is plenty of help available; PCIAW®, UKFT and BSIF can all help in various ways.
How do you think the Brexit trade deal with the EU will impact the professional clothing industry as a whole and do you have any predictions of what may change in the future because of the new trading terms?
I think initially the deal will cause a decrease in trade while people and companies adjust. Some companies may change strategy as a result of the changes depending where they are in their business life cycle. For example, businesses with owners close to retirement may decide they don’t want the hassle of dealing with new systems, processes, investing in staff and just pull out of exporting. However, most forward-thinking businesses will simply have to work with what we have got and make the best of the situation.
In reality, Brexit is not the biggest hurdle for businesses, it is the ferocity of the recession that is coming that is the problem. So many people have lost jobs – in our sector this means that we all have less people to clothe in uniforms and PPE. So many companies have gone to the wall and it is clear that with the end of furlough in sight many companies will not survive for long with a lack of support.
Far too many companies in our sector run on such thin margins that when hardship hits they just don’t have the cash reserves to draw on to get them through. Already we can see from Plimsoll analysis that some of the main players in the sector have not filed their accounts even with the three month extension provided by the UK government to help with COVID-19. There is usually only one reason for this: that is that they know that as soon as they publish, their better informed clients or suppliers will be looking to “run a mile” from them. At the end of the day, companies like this are distorting the marketplace artificially so I have no doubt some of them will not make it through 2021.
I think the main changes that will result from the combination of Brexit and COVID-19 will be:
1) There will be a deep recession and public and private sector budgets will be under severe pressure, so this means every company that survives will face even more fierce competition.
2) Only the strongest companies will make it through to 2022/23.
3) Hopefully, clients will pay more meaningful attention to the financial stability of potential contractors than ever before. The current focus which is still mainly on revenue size is just not sensible. Clients need to look at the financial health of future contractors – as I always say, Plimsoll is the best source of such data as they are forward-looking whereas D&B, Experian etc all look backwards. What is the point of reviewing only a companies accounts filed in January 2021 for the year end December 2019 and trying to understand whether or not a potential contractor will survive a 4 year contract starting in 2021 – the glaring hole in such an analysis is to wonder what happened to them in 2020!
4) There will be more UK domestic production, this is clear. Our own volumes of domestic production have increased. This sector always needs small volume, fast response production as part of the service mix for mid-to-large size contracts, this is needed to cover staff diversity, ethnic, allergenic or special size-based requirements. This is better done domestically, so a GB-based company who previously did that type of work in mainland EU will find it harder and more costly. Hopefully, clients will realise service will be better from those of us who have continuously invested in UK manufacturing so our tender promises are met in regards to diverse or special types of production. If clients weigh their tender questions to favour such solutions, this will help deliver better service and help to create and sustain UK production jobs, which is important. As we saw during COVID-19, those with domestic production ability were those that could respond fastest and more resiliently to the urgent needs for PPE and masks.
5) Tenders for the public sector will not be advertised in the OJEC any longer and public sector buyers will hopefully have the fresh opportunity to rethink what is important and what they will be able to achieve now that they are free of EU rules. This does have the potential to have an upside for UK companies, and why not – France for example has always been a very nationalistic buyer.
6) We will see costs rise in logistics/freight and these costs will need to be passed on in a sector that generally operates on thin margins.
7) There will be more jobs in the sector for those with export skills and/or logistics skills.
With Hunter Apparel being based in Northern Ireland, have any of your employees or logistics operations been affected by the border with the Republic of Ireland, who remains an EU member state?
Hunter U.K. HQ is a mere three minute drive from the border with the EU in the Republic of Ireland. With that level of proximity to the border, if anyone was going to suffer from a hard Brexit, it would be us.
15% of our staff reside in Donegal, Republic of Ireland and travel to work from the EU every day. In fact it is common for this staff to cross the border four or six times per day; back and forth to work, back and forth for shopping, leaving the kids to sport clubs, visiting family and friends. Thankfully, the Brexit that has been agreed does not interfere with any of this, people in NI and RoI can travel backwards and forwards across the border without interference.
Logistics between NI and RoI is also hassle-free because NI is the only part of the UK following EU regulations on goods so we have no change in reference to Brexit in that respect. This is fairly important to Hunter because we have substantial business in Ireland, in fact we are the market leader in the fire service sector for PPE, uniforms, and for care and maintenance services – we are also the market leader in the rail sector. All in all, our free access to Ireland is helpful and quite a relief – we will be able to vastly increase our exports to other EU countries as a consequence of the special status that NI has within the Brexit deal via the NI protocol.
PCIAW® members who have any questions should contact us at firstname.lastname@example.org
If the answer is not readily available from the official government website or your supporting customs partner – if we don’t know the answer we’ll find somebody who does.