Yesterday I was confronted by the reality of what will be the post Brexit world. I went to the pharmacist to collect my prescribed medication for treating my high blood pressure. Instead of the expected two packets of pills I received one. The pharmacist said that I should come back in two weeks for the other packet as there were problems with the supply of this drug. When I asked why there was a problem he sad it was the manufacturer, what he suggested was that they were not producing this drug at the moment. This I found very surprising as it’s a very common drug for which there is a constant and high demand. Then I realised its Brexit, we are not beginning to enter the world in which the essentials are in short supply.
One obvious problem it appears is capacity. Uncertainty about the future has discouraged business investment. (Something that in more honest times was termed an investment strike.) I assume that the pharmaceutical company was unwilling to invest in new machinery has they felt little confidence about the prospects for the economy in the future. Politicians are unable to offer any clarity what will be the post Brexit settlement. Correctly businesses assume that confusion amongst the political leadership as to what Brexit means and how negotiations should be conducted means that post Brexit Britain will be an economic mess. Why invest in expensive new machinery if the manufacturer believes the future is bleak. Therefore what prevails in industry is a culture of make do and mend. Under such circumstances there will be recurrent shortages of supply.
This suggests many possibilities such as that one of the machines making this drug has suffered a breakdown and the manufacturer is waiting for the necessary part to repair the machine. The past will probably be coming from abroad as the British machine tool industry has shrunk so much that it is unlikely that there is a British company making the required part. Obviously if the key part is being imported this will add to the delay. Although it is more likely that the manufacturer has delayed the costly repair work and is content to let stocks run down, hoping that when that point is reached economic circumstances are more propitiate and then they will feel the outlay on repairs is justified. One frightening alternative is that the manufacturer of this drug has decided not to manufacture it any more as it takes a gloomy view of the future economic prospects.
In such lean times as the present it is quite possible that the manufacturer has shut down one production line to keep costs down. If the drug that I use offers only a low profit margin to the manufacturer, it will be one of the first to be shut down. If a number of such drug manufacturers take the same attitude a shortage of this drug will soon develop.
There is one further complicated factor, all businesses now operate a just in time policy. This means that they only have enough stock in hand to met immediate demand. Keeping large stocks is expensive and cost conscious firms prefer to keep the minimum stock in hand. When the economic future is so uncertain these just in time stocks will be reduced to the barest possible minimum to reduce costs. If all firms are doing the same shortages will develop and pharmacists will be forced to shop around to find the drugs they need. The pharmacy that I use is part of a large chain and it is quite likely that they also are minimising their costs by holding a minimum of stock in there warehouses. What this means is shortages and delays in obtaining medicine are going to become more common.
When the railways were privatised in Britain it was so poorly managed that Britain became a case study for economists in how not to privatise a transport service. Similarly Brexit will provide a case study for economists as to how a successful economy was turned into a basketcase through the mistaken actions of a group of incompetent politicians.