Ideas & Debate

When political noise is a nightmare for business

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Summary

  • The economic fallout from Brexit will remain a global case study on the intersection between politics and business, a lesson not only applicable to developed countries, but even to emerging markets such as ours.
  • Stakeholder mapping the economic impact of political decisions requires a level of single-minded granularity to understand the bottom line impact on the average citizen.
  • Only the smart politician can have the intellectual wherewithal to do this.

Last Monday I reminisced about a fascinating conversation that I had with Joe [not his real name], a senior executive of a UK-headquartered global fast moving consumer good company.

Part of our conversation veered in the direction of the impact of Brexit on the retail side of business since I couldn’t understand the September 2021 phenomena of petrol stations running out of fuel in many parts of the UK.

The crisis was simple: fuel was in plenty, but there were not enough drivers to drive the fuel tankers needed to deliver the fuel to the petrol stations.

Why, you ask? Following Brexit which put massive brakes on the free movement of labour and goods across the English Channel, it turns out that most of the truck drivers, who required Heavy Goods Vehicle (HGV) licences, were of European descent and now required visas to get into the UK.

To add fuel to this fire — corny pun fully intended — a driver required additional safety qualifications to his HGV licence in order to carry chemicals such as petrol.

Now these drivers were not about to fill out long forms asking for information, including the name of the dentist who last did your root canal, and stand at the UK embassy line like the rest of us Third World long-suffering travellers. So they said, “Sod off as us we will happily traverse the more trade-friendly and welcoming geography of Europe”, thereby creating an enormous logistical shortage for goods movement.

According to a BBC article dated October 5,2021, Boris Johnson’s government said it would offer temporary visas for 5,000 overseas HGV drivers, including 300 immediate visas for tanker drivers.

Johnson later admitted that only 127 European Union fuel drivers had applied for the scheme, forcing the government to bring in about 200 Army and Royal Air Force personnel to help deliver fuel to petrol stations.

However, Joe tells me that the crisis didn’t end with just fuel though. One of the top four supermarket chains in the UK has had to move out slow moving goods from their shelves due to the logistical challenges of receiving and storing goods.

The supermarket chain had become operationally efficient by perfecting the art of just in time delivery, which eliminated the need to have large warehouses as distribution centres receiving goods from manufacturers, to further distribute to their wide network of stores.

By working closely with their logistics partners, the supermarket giant could efficiently anticipate the product needs of each store and ensure the right amount of goods needed on the shelves were delivered on time as stock depletions occurred.

Consequently for this top retailer, it has had to make a critical decision on how to sweat its greatest asset: its shelves. The result is that manufacturers of slower moving goods have lost an outlet for sales and you can imagine the downstream effect on those manufacturers in terms of forced lower production leading to job losses as well as the detrimental impact on the raw material suppliers.

The winners, according to Joe, are UK bus drivers who, experienced in driving large vehicles, are converting their bus driving licences into HGV licences as the government has fast tracked the process of HGV driver testing, which had significantly slowed down due to Covid-19.

In many cases, Joe said, the now scarce drivers had cottoned onto the basic economic premise of demand and supply and were demanding, in many cases, to be paid up to 10 percent of the value of goods being transported, making them receive earnings quite nearly close to UK white collar top executives.

Now could any of this have been anticipated when all the political noise was being made about Brexit? Certainly not by the politicians, who are really not in the business of doing business.

But I would hazard a guess that the logistics companies, who knew who made up the bulk of HGV drivers that moved critical goods around the jurisdiction, would have marked this as a flashing crimson red high probability and high impact event in their risk management matrix.

The economic fallout from Brexit will remain a global case study on the intersection between politics and business, a lesson not only applicable to developed countries, but even to emerging markets such as ours.

Stakeholder mapping the economic impact of political decisions requires a level of single-minded granularity to understand the bottom line impact on the average citizen. Only the smart politician can have the intellectual wherewithal to do this.

[email protected] Twitter: @carolmusyoka