Brexit Statement from Allgood plc

Current indications are that the UK Government intends to conclude a trade deal with the EU ahead of the March 2019 deadline for the UK’s departure from the EU. However, this is far from certain, and Allgood – along with all UK businesses – must consider the possible impacts of a ‘no deal’ scenario.

These are:

  1. Supply chain resilience
    •  Availability of product
    •  Lead times for supply of product
    •  Cost implications for imported goods
  2. Currency risk
  3. Taxation risk
  4. Certification & standards

Supply chain resilience

Allgood maintains a policy of ‘UK first’ in its manufacturing and sourcing decisions, and has done for years.

We are unique in the industry because we source 90% of our products from UK-based suppliers, including our own factory in Birmingham which manufactures around 25% of what we sell. The factory supplies Allgood alone and does not sell into the open market.

If border delays arise for imports following a ‘hard Brexit’, we are therefore largely insulated from potential product shortages, although we recognise that some of our UK suppliers are importers of raw materials and finished product. We are in discussions with them to understand their own contingency plans – such as to increase stock holdings - in the event of an abrupt departure.

Breakdown of spend

Spend By Location

% Spend

 

Spend By Currency

% Spend

CHINA

5.62

 

£

89.99

EU

3.38

 

3.38

INDIA

0.30

 

$

6.63

UK

89.99*

     

US

0.71

     

* Of which 24.20% is from our own factory.

 


Additionally, we maintain stock holdings in our central warehouse, as below:

  • We stock 6-8 weeks of all our own ‘UK stock’ SKU’s.
  • We forward-buy and maintain WIP with our UK/Euro suppliers, an additional 8-12 weeks.
  • We stock 4-6 months of all our own ‘China stock’ SKU’s.
  • We forward-buy and maintain WIP with our Chinese suppliers, an additional 8-12 weeks.
  • We forward-buy currency at preferential rates based on our projected annual spend.

Should the UK be obliged to trade with Europe under World Trade Organisation (WTO) rules - which would be presumed to apply in the event of ‘no deal’ - certain tariffs will be applied on imported products, thereby increasing costs on that small proportion of our supply chain which is from the EU. We are studying the potential implications of this, but the impact is likely to be minimal given our limited exposure.

Currency risk

For non-GBP denominated purchases, we forward-buy currency based on our projected annual spend, and also negotiate 12 month forward material purchase rates for material used by our own factory.

Taxation risk

The taxation (e.g. VAT) impact on our trade to and from the EU countries in case of a no-deal Brexit would be re-aligned to the procedures and rules currently relating to trading with non-EU countries, which Allgood already have in place, so the transition risk would be minimal.

Our customers, suppliers or even ourselves would not be adversely affected by cash flow impact on import/export taxation as the UK government would be introducing postponed accounting for import VAT on goods brought in (allowing us to account for import VAT on our VAT returns rather than when the goods arrive in the UK) and allow us to continue to zero-rate goods sold to EU customers.

Certification and standards

In response to this question; “Can the Commission confirm which UK conformity assessment bodies will be able to continue certifying products for sale on the EU market during the transition period? “The following was the response from the European Commission:

“In all other procedures than those covered by Article 123(6), UK authorities and UK designated bodies will continue to be recognised as competent authorities and competent bodies under Union law during the transition period. This will be the case, for instance, as regards type-approval of motor vehicles or certificates issued by notified bodies. 

In other words, subject to the transitional period being agreed between UK and EU the UK notified bodies will continue to be recognised for certification by the European Commission.

Given that there is a precedent in the EU’s commercial policy (e.g. with Canada), there is the potential for the mutual recognition of notified bodies in the future relationship between the UK and EU. This will be subject to agreement between UK and EU and will form part of the final negotiations, should a ‘no deal’ scenario arise.

In conclusion, we believe – in the event of ‘no deal’ and the application of WTO rules – that Allgood plc is well positioned to maintain supply and continue to offer our 90 day price guarantee on quoted projects.

For us to advise on specific projects, these should be discussed on a project by project basis, given that the product mix within projects varies depending upon the ranges specified. For example, a project designed using our Modric range and associated items would contain between 95-99% of UK-sourced product.

Please refer to the attached brochure, which gives further information of our sourcing philosophy and principles.

Alistair Higgins
Chief Executive, Allgood plc

 

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