Market intelligence

Issue No. 17.1Insight and market analysis to achieve better value from suppliers

MARKET INTELLIGENCE

We also look at attitudes to the cost/benefit analysis of Britain’s decision to leave the EU, and what strategies companies are adopting to mitigate risk – and manage uncertainty proactively.

When less than 60% of the respondents to our survey had a CPO on the board of their company, it’s no surprise that 99% think that the function doesn’t have a high enough profile. The majority of procurement professionals surveyed felt that better education of the board and other departments would help organisations to realise that procurement can help to solve some of their most pressing challenges.

In order to be heard, procurement leaders need to shout louder. ERA MD Robert Allison says, “Procurement managers need to initiate different kinds of conversations within the business. Squeezing costs is valuable – especially as companies prepare for a post-Brexit world. Yet if procurement is to truly prove its strategic value, it needs to help make decisions, not just be informed of them”.

Expense Reduction Analysts have teamed up with CIPS again this year, to look at the current state of the procurement world. Our recent survey, co-authored with Supply Management Insider, reveals a frustrated procurement community who feel the difference they can make and the influence they can have within organisations, is still being overlooked.

In a post-Brexit world and with Trump about to take the presidential oath in the US, the world – and UK organisations in particular – faces an unpredictable future. Our White Paper ‘Managing Uncertainty’ lifts the lid on the attitudes of the procurement community to a range of issues.

Why is the voice of the procurement department not being heard? Does the rest of the company believe, as 94% of procurement professionals seem to think, that more effective procurement in all areas can have demonstrable effect on bottom-line profit? If not, what can be done to raise the profile of procurement?

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To read the White Paper for free, please visit:expense-reduction.co.uk/ManagingUncertainty

Managing UncertaintyWhy procurement can make a difference

in partnership with:

Facilities Management: transparency is keyby Ian Morrison

For years Facilities Managers (FMs) have had to rely on the relationship with their contractors to know what their assets are doing and whether they are performing effectively. It was often a case of ‘no news is good news’ and if an asset didn’t fail, then that in itself was a measure of success.

As equipment becomes more intelligent and is connected to such technologies as energy monitoring and building management systems, it is becoming more and more essential that FMs have the data they need to effectively manage equipment performance.

Big dataOn a practical basis, most FMs are faced with a paucity of data about their estates and the assets within. Asset lists and real-time data are luxuries few have at their fingertips. Over time and with the growth of the ‘Internet of Things’ (a world of web-connected devices), the problem of an acute lack of data transparency will render the many advantages of smart data useless, inevitably putting performance under threat and driving up cost.

An acute lack of data also introduces risk to the business, leading to an over-reliance on contractors to know what is going on day-to-day. Ultimately though, any potential risk rests with the business itself and, when that can range from non-compliance to asset failure, you begin to understand why having that data accessible internally is so important. Whilst offsetting the risk to the contractor provides some comfort – they can help when things go wrong – downtime and compliance remain a major challenge for all FMs.

Technological advancesSoon, ‘smart’ equipment will be able to self-monitor and measure its own performance. When properly integrated into other systems, it will improve efficiencies, enhance service quality and reduce operational costs.

An obvious benefit of these technological advances is seen in, for example, condition based maintenance. Here, by self-monitoring its own performance, such a strategy becomes a manageable, low-risk option. These techniques, though currently deployed in some quarters, do not enjoy universal support because they are difficult to manage. The good news is these barriers will become a thing of the past.

A further significant benefit will be optimising equipment energy performance through the integration of a number of systems to minimise consumption. For example, FMs could adjust the operating times of equipment when demand is lower than normal.

But unless presented effectively, big data has the ability to get in the way of making the right decisions. The right technologies can make this manageable and, with the increasing deployment of mobile technology, FM is available everywhere and at any time. This can make asset management virtually instantaneous and reduce the impact of failures and downtime to the business.

Decision makingHaving the right supply partners who can support these concepts is now crucial to a client who is seeking to optimise asset performance.

Improving up-time and creating innovation whilst driving down costs sounds like Utopia, but having the right data, the right measures and transparency of information at your fingertips will help to achieve these objectives.

So it’s clear that when selecting a supply partner and service delivery model, it is important not just to consider today’s standard FM requirements, but also how your business will develop over time in the future.

Maintenance and asset optimisation need to be considered over the longer term. FM budgets are always tight; it is for precisely this reason that procuring FM services should be managed responsibly. It’s vital to take into account the bigger picture; don’t just focus on the technical delivery, but on all aspects of effective ongoing asset management.

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Market Intelligence Market IntelligenceIssue No. 17.1 Issue No. 17.1

Water: The market opens in April 2017by Phil Howarth

April 2017 represents a significant milestone, as the water market in England is deregulated.

What is happening?Perhaps the best way to describe what is happening is to look at the example set by Scotland.

In 2008 the water market in Scotland was deregulated. Scottish Water remained the wholesaler – and created a retail arm of its own (Business Stream) – whilst other businesses were able to enter the market. These new retailers add their own service elements to the basic supply and market them to Scottish businesses in competition with Business Stream. Organisations then benefit from the ability to shop around in the same way you can with Gas, Electric & Telecoms.

In England, from April 2017 a similar breakup of the market will take place, although the picture looks more complicated with regional monopolies of more than twenty different companies. Whilst the physical supply of water itself will remain unchanged, it’s the added services that will be the main ‘difference’.

A major part of the work ERA undertake is a full forensic audit of a client’s water accounts, optimising tariffs, seeking out efficiencies, providing monitoring & management and recovering any historic over charging.

The opportunity that will be created by deregulation should not be underestimated. A process is about to take place that has already seen manoeuvrings from some of the major players:

• Severn Trent and United Utilities have joined forces as ‘Water Plus’

• Southern Water is exiting and has sold its books to Business Stream

• Thames Water is exiting and has sold its books to Castle Water

• South West Water has acquired Sembcorp• South Staffs has acquired Cambridge Water

By the time you read this, it’s likely other deals will have been completed or are imminent as the market rebalances.

What do I need to do?From 1st April 2017 eligible non-household customers will be able to choose who they buy their water and sewerage services from. This includes all eligible businesses whether large or small. The change is driven by the Government’s aim to introduce more competition into the water industry in England.

How it works nowAll businesses receive water and sewerage services from their local supplier, who also provides the customer service, making them responsible for both wholesale and retail services.

Wholesale services include:• Water supply• Removal and treatment of sewerage

Retail services include:• Billing• Meter reading• Customer queries

How it will work after 1st April 2017Businesses will be able to choose who supplies their retail services for water, sewerage and trade effluent.

Having a choice will mean you’ll be able to consider the best services for your business, which could include things like:

• Price (however ERA are currently predicting only a 1% or 2% discount)

• Account consolidation (having one, instead of multiple suppliers)

• E-billing• Billing format (choosing suppliers who offer

‘spreadsheet’ billing)• Contract or payment terms• Customer service

Who are water retailers?Retailers are companies that have been granted a licence by the water regulator (OFWAT), to provide retail services to non-household customers.

What happens next?In order to prepare for market opening, ERA would recommend that data is collated as soon as possible. This will allow analysis of current spending and supply details are optimised in readiness for when the market opens for business on the 1st April 2017, putting you in the best position to make the most of the opportunity.



If the forthcoming 2017 Rating Revaluation has seemed a bit abstract, the recent publication of the draft Rating List for England and Wales will make it appear much more defined.

The List shows details about proposed rateable values and it is up to ratepayers to check that they are correct.

There is also a new appeals process in place. It consists of three stages in England: ‘Check, Challenge and Appeal’ - though the Scottish and Welsh devolved administrations are considering changes of their own.

Depending on your point of viewThe Government sees this new process as a way of simplifying the whole rating appeals system, aiming to save local government substantial sums of money.

That’s not how everybody sees it though. Some businesses and rating agents are concerned that the new system simply shifts the burden of responsibility onto the shoulders of ratepayers.

Because of that, the new appeals system will require more involvement from anyone wishing to challenge their rateable values. Significant evidence and proof will need to be provided for their challenge to meet the stated criteria of being both ‘meaningful’ and ‘complete’.

DisparityFor many businesses, the longer than usual gap between rating revaluations has hit them hard, leaving them facing big rate increases out of all proportion to the actual economic climate. For others, the revaluation is likely to be generous as it seems that the new list is hallmarked by some large disparities.

The 2017 Rating Revaluation does seek to address this, but is being anticipated as the most major shake-up of business rates in a generation. The opportunity for businesses to challenge their values has perhaps never been greater.

So is it easy?With a new system in place, there are still areas where it is unclear to many ratepayers how the new system will work. One of these areas is to do with so-called ‘Transitional Arrangements’, and in England there will be phasing of large changes in liability in up to three bandings, both upwards and downwards. Separate transitional schemes for Scotland and Wales are also being considered.

The new ‘Check, Challenge and Appeal’ process is likely to be a challenge for everyone involved, especially with the Valuation Office Agency (VOA) reserving the right to take more time over disclosing information. The process may also require evidence, photographs and valuations and perhaps even precedent and case law where appropriate.

Whilst the stated aim of the gGvernment is to simplify the process, the experience of ratepayers and rating agents may well be different – only time will tell.

Regardless of potential obstacles to a successful rating appeal, it’s clear that now that the draft Rating List is published, businesses need to shift up a gear and get checking their details in preparation for 2017.

You can see the draft Rating List at www.tax.service.gov.uk/view-my-valuation

To get a better understanding of how it financially impacts you, and how you can mitigate it, please get in touch.

2017 Business Rates changes: how are they affecting you?by Paul Ginness

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Market Intelligence Issue No. 17.1

‘Hybrid Mail’ is not a new concept and adoption across the UK has been slow to take hold, but the anecdotal evidence is that real market traction is now taking place.

What is ‘Hybrid Mail’?The term ‘hybrid’ comes from the fact that the mail piece leaves the sender in electronic format, yet the recipient receives a physical letter, invoice or statement.

The hybrid mail provider typically maximises the postal discounts available by using address verification techniques and printing the combined volumes of many organisations thus avoiding the collection and sorting elements of the Royal Mail’s processes.

In the UK, Ofcom - the mail market regulator - introduced competition to the Royal Mail by ensuring that competitors still had access to the Royal Mail’s delivery network. The service offered is known as Downstream Access (DSA) and offers the carriers discounts of around 60% on the cost of postage.

Most businesses don’t have the volumes or frequency of their own mailings to meet the entry requirements, which are normally a minimum of 4,000 items in a single mailing.

These alternative carriers will offer varying discounts to organisations and will collect filled envelopes ready for dispatch, but even then the volume requirements are very high, usually 500 items per working day. This in turn means

that for the vast majority of UK businesses the discounts available for physical mail delivery are simply not available.

Generating hybrid mail can be as simple as installing a virtual printer driver, and they bring substantially reduced costs (25-40% of total mailing costs) to even small volume users.

Hybrid mail therefore gives the potential for organisations to link their output transactional mail from ERP or other Accounting Systems, to create a truly integrated approach. Similarly, letters, invoices and statements will tend to be produced as Word or PDF documents meaning that hybrid mail printer drivers will be able to read these documents ‘out of the box’.

The transition from physical mail to hybrid mail is seamless and can often lead to payments being received more quickly; particularly if all items are transmitted solely by email.

Some hybrid mail providers will combine a secure email with a physical ‘fall back’ by means of the sender being alerted to any emails that are not opened within an agreed number of days, thus ensuring delivery of the item by one medium or the other, therefore giving clients the best of both worlds.

Our postal expert is well versed in the technology, so we are well placed to advise – always with an emphasis, as ever – on reducing your overall outgoings, and embracing new ways of doing things.

‘Hybrid Mail’ may be one the best cost saving ideas for your organisation that you have never heard ofby Zoe Willis



Are your food costs rising? What can you do about it?by Chris Wardle FIH MCIPS

My food prices are changing. What’s going on?You may have had notification from your food supplier/s that prices are changing. Although some items will reduce in price, the common theme is that you will have been paying more for certain items since Nov 2016.

Why is this so?Save for a few volatile lines, food prices have been pretty static across the board for the last 3 or 4 years. For the past 2 years or so, the Consumer Price Index (CPI) for foodstuffs has shown either minor decreases or little change in prices compared to those of 12 months previous, which has been great for budgets and planning purposes.

But things are changing and perhaps came to wider public attention in October when the ‘Marmitegate’ or ‘Marmageddon’ row saw stocks of the popular/unpopular (delete as appropriate) spread run low in Tesco. This was due to the producer Unilever imposing a 10% price hike across its range due to the slump in the value of the Sterling caused by Brexit. Though now resolved, Tesco’s chairman John Allan warned that food inflation could reach 3%.

Currency fluctuations have had a 13% adverse impact on the US Dollar and the Euro. This influence of the sudden change in currency value has immediate and severe implications for the UK foodservice market. Suppliers are working to help mitigate a proportion of the adverse impact. However, it is unlikely that this will stretch to all commodities. In addition, a weaker Sterling is likely to increase exports,

impact crop quality and quantity.• Fuelled by population and economic

growth, global utilisation of vegetable oils is expected to expand further. Rapeseed and Sunflower prices have jumped significantly following the EU Referendum with currency pressures taking their toll. This is unlikely to change short-term.

• Meat: Increased exports to Asia have seen supply within EU markets, for beef and pork, impact on price.

• Trade news for 2016 for salmon has so far been dominated by reports of a massive algal bloom in southern Chile that had killed some 27 million fish. This has been compounded by an expected drop in production in Norway, where growth is currently limited by sea lice issues. This is pushing up the already high Norwegian prices even further.

(Source: Brakes report Oct 16)

Can you do anything about it?If your budget is anything more than £50k per annum then you will likely be aware of price increases and your suppliers should have informed you of impending changes. Some of these changes will be significant and we have seen examples of dairy lines increasing by 40%.

Larger suppliers such as Brakes and Bidvest have resisted the urge to impose a blanket percentage increase across their ranges, choosing instead to delay the normal Sep/Oct price reviews for a few weeks to review external influences such as those described. Price changes have been passed on to

consumers, though not fully. For example, we noted price increases on certain cheese products of around 9% in the EU, whereas an average of 6% is what we are seeing from UK suppliers.

Smaller, less ‘corporate’ suppliers may well use the various factors that have impacted food prices to their own advantage. We have come across a handful of instances where blanket increases were suggested to clients. When we have challenged these on their behalf, a more focused and less ‘shotgun’ approach to price hiking has resulted, affecting fewer lines and to a lesser degree.

But what is acceptable; what does ‘good’ pricing look like?This is a tricky question and one that will likely take some time and effort for most organisations to answer, if they have the necessary expertise to do so.

Our advice would be to shop around; Local and Regional suppliers may be able to do better deals on certain items than national suppliers. If you have the resource to broker such deals then it can be worthwhile, though don’t forget that ordering, receiving, putting away and processing small orders from several suppliers constitutes hidden cost. You may save a few pounds on goods, but if it has taken half a day a week to achieve does it make economic sense to do so? And if you don’t have the internal expert resource to review food pricing for you, perhaps now is the time to contact ERA to see if we can help.

with the resulting rise in demand narrowing the pricing gap still further.

Other issues have also contributed to changing food prices. Dairy prices, especially butter and milk, dropped sharply 2 years ago when EU quotas were abolished for milk, which in turn led to supply outstripping demand when farmers chose to produce more milk than they were previously permitted. This trend is now reversing due to a global shortage. Years of low prices forced UK farmers to buy poor quality feed, yielding lower volumes and some chose not to replace their herds when they would previously have done so. Staying with dairy, butter production is dependent on cream, which has soared in price recently. It goes without saying that suppliers pass on these increases in raw goods to consumers.

But it isn’t just Brexit and currency issues affecting food prices. Other influences are as follows:

• Key vegetable growing areas in France, Belgium and Holland have been adversely affected by heavy rains and floods. This subsequent limiting of crops, quality and yields looks likely to create one of the worst harvests in recent years.

• A difficult position for potatoes and especially chips currently exists, with currency issues and wet weather in northern Europe applying inflationary pressures. Heavy rain and the resulting flooding have been reported at some of the main growing regions in Europe, with the potential to truly



Applying the Pareto Principleby Robert Stearn

The Pareto Principle, also known as the 80/20 rule, is a classic. And these things become so for a reason, as noted management guru Peter Drucker observes “There is nothing quite so useless, as doing with great efficiency, something that should not be done at all”.

The principle states that by and large 20% of the cause produces 80% of the consequence.

This observation was originally the result of Italian economist Pareto noticing in 1906 that 80% of Italy’s land was owned by 20% of the population. He then carried out surveys on a variety of other countries and found to his surprise that a similar distribution applied.

As he and others later discovered, the principle has a certain universality which can be applied in almost any context. It is a powerful, fundamental principle of life – and of working smart.

So what else can you use Pareto to illustrate?Well, for example, in business it’s generally true to say that 80% of the results come from 20% of effort, or that the top 20% of your customers will account for 80% of your profit.

Consider applying the 80/20 rule to the information you receive: perhaps 20% is useful, whereas 80% is not. The key to efficiency – and success – is to identify and focus on that 20% and ignore or remove the rest completely; it’s wasted effort.

The same is true of time expended for results achieved. Think of the benefits you could enjoy if you apply the Pareto Principle to your time management and your personal and business productivity.

Typically a business will try to squeeze every last drop out of each opportunity, to go ‘100% all-out’, without consideration of the impact on time, productivity and wastage.

Simple, time-efficient businesses recognise that it is fundamentally inefficient to go for the ‘whole pie’ when you can get the majority of results for the minority of effort.

Safe in the knowledge that your efforts are not going to waste, you can concentrate on what wins you customers – and then enjoy the success.

Most businesses are not brave enough – or innovative enough – to pursue such a strategy, but you can’t argue with the logic.

Concentrate on the 20% that produces the 80% of benefit.

You can look at it another way; spend 80% of your time working on the 20% that really gets you results. In this way you can work more efficiently, ensuring that – to continue the metaphor – you spend 80% of your time servicing that 20% of clients that produce 80% of your profit.

‘You win some, you lose some’ is no way to run a successful business, but armed with knowledge of the Pareto Principle, you can work the system to your benefit. It’s not just about working smarter – it’s about working smarter on the right things that will get you the best results.

To put this on the context of organisational costs, the reality is that most organisations don’t rigorously manage up to 20% of their costs – and those suppliers – more than once every few years. To most businesses, concentrating on that 80% of the costs – typically the costs of goods for resale or the cost of manufacture – makes sense.

It’s where the skills of the procurement team they have – if they have one – lie, and it’s certainly the right approach to focus on the largest costs where you can make the most difference. Letting the other 20% ‘tick over’ becomes an inevitability borne of a lack of time, resource and knowledge.

By focusing on the 80%, the 20% is neglected, and for most organisations 20% of the cost is still a significant sum. Utilising external resource to apply focus to that 20% - typically a range of indirect costs such as IT & Comms, Facilities Management, Fuel, Insurance, Office Supplies, Print & Copiers, Utilities and Waste – can bring tangible benefits.



The path to world-class procurementby Karnjit Cooner



Any size of organisation, from an SME (or a school!) without a procurement team, to large multinationals with dedicated staff, can make the transition to having a world-class procurement function.

Since all businesses exist to make profit, it stands to reason that this applies to your suppliers too.

Contracts are often written specifically to crank up margin over time and finance and procurement directors often lack the time, the expertise and the knowledge required to prevent suppliers from generating maximum income from their account. In our experience, it’s either that – or a misplaced belief that they are already paying the best price they can – that prevents organisations from tackling these issues, and that can lead to significant sums of money leaking out of the business unnecessarily.

Generally, suppliers base the price you are offered on the opportunity in front of them on the given day and, of course, their objective is to maximise their margin. Their sales people are, on average, better trained, better resourced and better incentivised – as well as being given more freedom to do that - than your ‘buyers’ are. And the inverted commas are because the majority of people purchasing on behalf of organisations aren’t trained buyers at all. Add to that the fact that the suppliers understand their own industry better than you do and it can start to sound like an uneven playing field.

In our experience it most certainly is.

It’s therefore important to remember that the path to procurement enlightenment starts with a single step; improving your procurement incrementally can be a good way of breaking the task down into more manageable chunks, and there are benefits along the way.

Our five-step programme can lead you from a place of ‘transactional procurement’ to ‘world-class’ by targeting ten key attributes.

Effective procurement of the full range of goods and services you buy in to run your business has some tangible effects:

• Lower operating costs• Financial savings• Budget recovered to be redeployed

elsewhere• Increased shareholder value

More results-oriented procurement strategies can be really effective in times of economic strain.

Economic challenges can mean finding effective new sources of revenue is an imperative. Where better to look, than trying to keep more of the money you earn and pay less to suppliers in the first place? As more uncertainty looms, risk increases and organisations come under competitive pressure to look at innovative ways to secure growth and control cost.

Sales vs. ProcurementIt’s an old debate in procurement circles, but the argument about who can add the most value, Sales or Procurement, is an interesting one. Our recent survey with CIPS demonstrated that a huge majority of procurement professionals believe that more investment in their department will generate tangible improvements to bottom line profit. A simple 20% reduction in cost – about our average saving – across the board on an organisation’s indirect costs can yield the same enhancement to profit as would be generated by growing the entire company by 20%... and it’s a far easier process.

This can help to establish a baseline for your organisation to begin making improvements from. It also establishes a pathway, enabling organisations to see where improvements need to be made and where the opportunity for improved effectiveness and efficiency exist.

There are a huge number of tangible benefits to undertaking a programme of work such as this one. Proactive management of both process and cost allows organisations to realise immediate upfront cost savings by procuring items, services and contracts at the best price available.

Procurement Maturity AssessmentAn ERA procurement expert can begin to make an assessment of where your purchasing is at currently, by assessing your current level of maturity across a range of attributes:

Transactional Procurement

Reactive Contracts

Proactive Category

Commercial Leadership World-Class

Five steps to ‘world-class’ procurement

Strategy & Organisation

Category Management

People, Resource & SkillsKPIs, Opportunity

Assessments, Saving Targets, Performance

Management

Business Engagement & Functional Effectiveness

Supplier Relationship Management

Measurement, Policies, Controls & Compliance,

Corporate and Social Responsibility

Strategic Sourcing

Purchase to Pay

Systems, Data & Metrics

Procurement attributes

Stephen Whitlam from our Payments Team explains a key market change and how businesses can manage its potential impact.

Most businesses are aware that during 2015 there were dramatic changes in Merchant Acquirer interchange costs for personal card transactions. The cost for credit cards fell significantly from between 0.8% to 1.5% by value to a common level of 0.3%.

Visa debit cards, though, saw a move from circa 8p per transaction to 0.2% by value plus 1p. The impact of this on high-value transactions – those greater than around £240 or so – was mitigated by a cap of 50p (£1 for non-secure transactions).

Whilst every acquirer adapted to the changes differently, it is fair to say that there was no particular disruption. This was because at a very broad level, the cost decreases the acquirers enjoyed on their credit cards activity offset any increases in debit card costs. All were addressing the issue at varying paces, or had plans to do so by the end of 2017.

September 2016: the cat amongst the pigeons!Visa dropped the debit card interchange cap of 50p (as well as the 1p per transaction addition) which suddenly increased the cost burden where there are high value debit card transactions. This has fallen at a time when the acquirers were beginning to see the benefits of investment in their own IT, which helps more

readily identify the profitability of accounts in much more dynamic ways than was previously available.

So we are now seeing clients receive notifications of significant changes in their card costs. Particularly those on blended rather than cost-plus charging arrangements. This is not just those who have high value transactions by the way; the IT investments have enabled a wider concentration of effort.

Are increases in costs justified?The simple answer is that without an understanding of a business’ transaction mix, it is difficult to know. Everyone would accept and understand that a supplier has to maintain an adequate margin... but is the proposed margin fair and competitive?

ERA’s Payments Team recommends a process of quantifying volumes and average transaction scale for each card type commonly used, and then calculating both the pre-September 2016 and proposed margins. It is then a judgment call as to whether the change between the two justifies challenge and – importantly – whether the ongoing margin is fair and competitive.

The Payments Team is happy to discuss helping any client through this activity. Either in whole or with specific elements. We have a detailed knowledge of current acquirer procedures and strategies.

Card costs for high value transactionsby Stephen Whitlam & Paul Davidson



The impact of the decision to leave the EU last summer is still largely to be felt but, as the March deadline set by Prime Minister May approaches, the consequences for Distribution could be costly for your customers, as well as for you.

2016 might be over and done with, but the decisions made during that strangest of years will have a lasting impact. A scarcely believing media woke to Brexit Britain, and the US followed that up with the election of Celebrity Apprentice presenter Donald Trump in November. Leicester City won the premier league and the year was scattered with loss... David Bowie, Prince, Leonard Cohen, Mohammed Ali, Gene Wilder, Alan Rickman, Terry Wogan, Victoria Wood, Caroline Ahern and EU citizenship.

A Brexit plan is slated to be in place by March and with it the subsequent evocation of Article 50. We’re careering down the hill toward a negotiation with former friends not likely to give us an easy ride; ‘pour encourager les autres’. For international distribution and logistics, the effects are – like for most other things in these negotiation – yet to be known.

A soft Brexit could perhaps lead to a way of remaining, as is the case currently, in the EU customs union. Currently, there are no customs fees levied on goods import and exporting between EU member states, and a common tariff applied to goods coming in from outside.

However, when it comes to non-EU countries – including some European neighbours such as Norway and Switzerland – and every other country, dependency and territory in the world – duties and fees are applied. Post-Brexit, that will apply to all trade with our European partners as well. And we’ve become heavily reliant on these relationships, since more than half of our exports go to current EU countries.

There is also a knock-on effect for your customers. A customer in Spain taking in your goods will, under the potential new circumstances, have to pay custom fees in their country to do so. It is going to cost you to import goods and it’s going to cost your customers buying your exported goods as well.

What might that look like in practice?Pre-Brexit:1. You buy a product from a marketplace like

Amazon/Ebay/Rakuten/Wayfair. You may not know where that product is being shipped from. If it comes from an EU country like Spain, then you currently don’t pay any duty, or customs declaration surcharges. If it comes from a non-EU country you will be required to pay UK import duty and customs declaration surcharges. You may have already experienced this.

2. You sell a product to a company in Spain. Currently neither you nor the recipient in Spain pays any duty or customs declaration surcharges when it is imported to Spain.

Post-Brexit:1. You buy a product from a marketplace like

Amazon/Ebay/Rakuten/Wayfair. You may not know where that product is being shipped from. If it comes from an EU country like Spain, then you will have to pay UK import duty, and customs declaration surcharges applicable.

2. You sell a product to a company in Spain. The Spanish recipient will have to pay any Spanish import duty and customs declaration surcharges when it is imported to Spain.

To get a better understanding of how these changes might impact you, and how best to plan ahead, please get in touch.

EU Distribution: what’s changed?by Simon Perkins



Ofcom finally enforces legal split of BT & Openreachby Pritesh Patel

On 29th November Ofcom announced it is proceeding with a formal legal notification to separate the Openreach division from BT Group. The former manages the majority of the UK telephony and data network, which telecoms suppliers (BT, Sky, TalkTalk, Daisy, et al) then resell on to businesses and consumers.

This comes after the Telecoms regulator had requested that BT Group split their operations into two legally-distinct companies back in July 2016. Following Ofcom’s intervention in July, Mike McTighe was announced as the first Chairman of BT’s local fixed network business. Having previously served as an Ofcom board member for eight years, it was seen as a move by BT to meet Ofcom’s concerns. However Ofcom has stated that this was insufficient.

The introduction of legal proceedings will require the telecoms giant to remove all affiliations between the two entities, with two separate boards and a chairperson with no BT connections. The move comes amid demands from other telecoms suppliers to remove the BT Group monopoly over services. Currently BT wholesale offers infrastructure to BT and competitors equally, yet still oversees control of Openreach finances.

So what impact will these changes have on businesses? Theoretically lower lead times

on repairs and an increased investment in infrastructure (one of Ofcom’s aims for the split is to increase the amount of Full Fibre Broadband use across the network). The result of this would be less downtime and improved service levels. This, coupled with an ability to operate on higher network speeds ultimately translates to greater productivity for businesses.

However, it is not all plain sailing. Despite major operators pushing for a total separation of the two entities, Ofcom have made clear that ownership of Openreach will still be retained by BT, over concerns of pension disruption. Despite opposition from rivals, Ofcom has stated that a ‘legal separation’ will still achieve the desired improvements without the lengthy process of pushing for a true split.

What short term effects can we expect to see?Ultimately few, as Ofcom must first seek EU approval to enforce the separation. This is a relatively drawn-out process that may take months, adding to the frustration of rival operators and businesses currently suffering from Openreach delays.

Effective project management through industry knowledge and sourcing the right technology partner can help to minimise Openreach’s shortcomings in service, something which ERA’s Communications Team is well accustomed in dealing with.



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