How will Brexit impact Life Science Companies
Brexit in Brief
After over forty years of membership, on 26th June 2016, the UK voted in the EU Referendum to leave the European Union – three and a half years later the “split” is now finally going ahead on 1st January 2021.
The terms of the UK’s exit are still being negotiated, in the final weeks of December 2020, on significant items that are fundamental to the UK economy. This article discusses the knowns and unknowns, and how companies should prepare for the post-Brexit world.
“We get together with people because they're the same or because they're different, and in the end we split with them for exactly the same reasons.”Nick Hornby
The potential loss of access to the free market, as outlined in the European Free Trade Agreement (EFTA), is one of the main risks to UK firms. The consequences of which would mean defaulting to the World Trade Organisation (WTO) terms:
- Value-Added Tax (VAT) rates and process adjusted for export and import trade to/from the EU
- Tariffs imposed on cross-border trade
It is estimated that the impact of Brexit on the UK economy could equate to a £75 billion loss if no deal is made.
However, whilst a member of the EU, conditions of the EFTA have impeded the UK’s ability to reach favourable agreements with non-EU countries, which may be alleviated post-Brexit.
Unfortunately, the negotiations are going to the wire and companies will need to react quickly to fulfil obligations on 1st January 2021 and ensure that their ERP systems can be re-configured to support the potential VAT and tariff changes.
The last decade has seen a net migration of over 1.5 million workers into the UK from the EU. These vital resources have filled significant skill shortages in sectors like hospitality and healthcare.
Companies should have completed all the necessary steps to ensure that their EU workers have the continued right to work in the UK. However, there is a predicted skills shortage expected, with recruiters already seeing a dramatic reduction in the number of candidates to fill vacancies in some sectors.
New ways of working
Over the last decades, the UK has been the centre of life sciences in the EU, and UK-based companies have benefitted from unity in ways of working. Post-Brexit, alternative processes and procedures need to be established in the UK for the following significant areas:
Quality Assurance and Product Safety
Research & Development
Research and development in UK firms has benefited from coordinated research collaborations across Europe, as well as access to funding from the Innovative Medicines Initiative and Horizon 2020 (7-year program with €80 billion of funding).
The UK will lose access to this funding and may well see the loss of a number of talented researchers to research facilities in the EU. Currently, it is unclear if the UK Government will supplement the lost funding.
With uncertainty in the UK stock market, there could be a downgrade in UK company share prices, causing an increase in ‘hostile’ merger and acquisition activities in the life science sector, particularly from foreign companies.
Despite whether a Brexit trade deal is made, impacts on supply chains are expected due to delays in processing freight and inconsistencies in documentation. Companies must mitigate these risks by:
- Ensuring shipping documentation is in line with new regulations – paying careful attention to outputs from logistics and ERP systems.
- Ensuring supply chain stability has been assessed – stock building in the EU and/or the UK, and re-examining trade routes.