Preparing for a post-Brexit world
With the clock rapidly counting down on Britain’s exit from the European Union (EU), it’s once again time to consider what impact this might have on the logistics industry. When you consider that the EU as a whole is the UK’s largest trading partner, accounting for 44% of all UK exports and 53% of all UK imports in 2017, whatever the impact, it’s not likely to be a small one.
Brexit is scheduled to take place in March 2019 and already we are beginning to see the effects of leaving the EU with no trade deal, including apprehension from well-known automotive manufacturers such as BMW, Toyota and Jaguar Land Rover. During the Paris Motor Show, both BMW and Toyota stated that, should a hard Brexit jeopardise the movement of parts and finished vehicles, they may consider withdrawing activities from the UK. Jaguar Land Rover is also wary of an uncertain Brexit deal, reporting a delay in their decision to build electric vehicles (EV) in the UK until the situation becomes clearer. Considering the automotive industry is essential to the UK economy, we are in danger of witnessing major production decline and loss of market access should the UK leave the EU without a deal for continued trade.
With the current uncertainty surrounding Brexit and a trade deal, Andrew Austin, Group Operations Director at Priority Freight, considers what the next step could be, “What needs to happen with Brexit is one of three things: clarity around a deal; an extension to the Article 50 timetable; or another referendum.
“In the current climate, clarity around a deal seems unlikely and although an extension to Article 50 may potentially increase the uncertainty, it would give more time to solidify a deal. However, with the growing awareness of the significant implications of leaving the EU, paired with the lack of a cohesive political appetite in the UK at the moment, another referendum could be a valid option.
“To avoid further hesitation from the automotive and other industries, it is imperative that there is clarity over Brexit as soon as possible, regardless of whether or not there is a trade deal, so that organisations can consider the implications and plan accordingly.”
With no final confirmation on how Brexit will take place, there is still a chance that we will leave the single market with a trade deal. How this will look, no one knows, but there are two scenarios that have previously been discussed that are still relevant today:
The UK leaves the EU, maintaining almost all its access to the single market, but with limits on the free movement of labour. This means that trade with the EU could continue to work in much the same way, but that the UK would have the freedom to negotiate new deals with non-EU countries once Article 50 agreements have been completed. This kind of deal could lead to employment issues due to its limitations on free movement of labour and ultimately, many EU laws and legislations would still apply to the UK when it comes to trade, which will no doubt cause unrest for individuals who wanted to be free from these.
The UK leave the single market but secures free trade – meaning there would be no tariffs on goods from the EU, however a customs border would be implemented and all goods would have to go through checks. Though this would be a positive for import and export costs on goods, it would ultimately lead to highly complex supply chains and increased costs to run the customs border.
Reviewing the two approaches, Andrew Austin goes on to say, “Scenario one would ultimately be better for the UK, as the need to freely trade with other nations is essential for the long-term prosperity of the nation and without which there would be a profound economic impact. The restriction on labour may well have an economic and social impact, but ultimately the ability to trade in an effective way will have a longer-term impact on the economy.
“It may appear to be a very light version of Brexit to the supporters of that particular bias, but it does at least present some concessions with regard to trade agreements and the ability to break free of some EU legislative requirements.”
It’s safe to say that neither of these scenarios are perfect, however they would help to outline the parameters that organisations need to work to post-Brexit, something Andrew Austin highlights as being of extreme importance to the future of the UK.
Recent talks from the Prime Minister have suggested that it is the UK’s intention to make a clean break from the EU, which involves leaving the single market without a replacement deal. Therefore, it’s no wonder that there has been so much focus on a hard Brexit.
Ultimately, with the logistics industry working so closely with EU imports and exports, there’s no question that it’s going to take the brunt of the implications from Brexit. There are major worries surrounding the licensing of UK drivers in mainland Europe and vice versa, custom checks creating more intricate supply chains and the impact that an increase in cost for EU imports will have on industries across the UK, such as the automotive trade.
However, it isn’t all bad news. Logistics companies can hold an advantage over competitors if they are proactive, innovative and brave. This means when the UK exits the EU and the single market, the logistics industry has real potential to be in a strong place. Andrew Austin believes that Brexit will give logistics companies the chance to prove their capabilities and use their skills to guide clients and suppliers through, “they will need the organisational skills and reach that dedicated logistics specialists, such as Priority Freight, can offer in order to provide the required control and visibility over the supply chain that will be paramount in post-Brexit UK and beyond.”
Post-Brexit, there will inevitably be changes to the customs procedure required for EU imports and exports. While we’re not certain what this will look like, we can glean some understanding by listening to port authorities, such as the new system for third-country trade being introduced in January, with each form containing 84 data fields and taking 10-15 minutes to fill out. With lengthier procedures and more rigorous customs checks, activity is only going to increase, both within the ports and the surrounding roads.
The Port of Dover alone handles £120bn in imports and exports (17% of Britain’s total). Couple this with Eurotunnel’s 24/7 service, carrying around 25% of trade with the EU (where 99% is currently not checked as it is tariff free), there is no doubt that the introduction of even the most basic customs checks will cause delays. In fact, Port of Dover chiefs and Freight Transport Association (FTA) members suggesting that even a two-minute delay in Dover could lead to a 17-mile queue of lorries on the M20. There are, of course, long-term plans in place to ensure there is not a repeat of 2015’s Operation Stack, which saw huge disturbances and delays across Kent’s roads. The new strategy, Operation Brock, will use a 13-mile stretch of the M20 between Maidstone and Ashford as a temporary lorry truck park holding around 2,000 vehicles. Though penned as a ‘temporary’ solution, there are concerns that the proposed infrastructure scheme will not be completed by the time Brexit occurs in March, leaving the areas surrounding Dover in danger of huge delays. Such congestion will inevitably impact supply chains, increasing time and costs to the manufacturer, which in turn is likely to be passed the end consumer.
Andrew Austin continues, “A time of political change like this will always bring an element of uncertainty but we must focus on the opportunities it also presents. A logistics partner must be proactive in pre-empting supply chain interference. Certainly, for Priority Freight, it will be business as usual and we will continue to increase our footprint across Continental Europe and other geographies to ensure we provide even greater support for our clients around the world.” In the short-term, Priority Freight will be seeking clarity over both of these issues and in the long-term, the company aims to continue evolving and adjusting the global business model to stay ahead of any changes.
While it is clear that the UK leaving the EU is going to cause a number of industry complications, logistics companies should focus on continuing to grow and seek opportunities in a post-Brexit world. In the short-term, supply chains are likely to be in disarray. Time-critical logistics specialists, like Priority Freight, are on hand to partner with and support manufacturers and suppliers to add speed and flexibility to their supply chains. In the long-term, trade deals with other countries may be easier to win and offer the opportunity for Britain to become more global, still looking to the EU but also to the rest of the world.