Brexit is coming – but then what?
The United Kingdom and the European Union are in the middle of a lengthy and complicated series of Brexit negotiations.
Where is the UK heading? And what does Brexit have in store for logistics providers? Here are the thoughts of Nick Lowe, Managing Director, DACHSER UK.
Brexit and Trade
As things stand, the UK will no longer be a member of the European Union after March 29, 2019. Whilst we can’t be certain of the exact outcome yet, when it comes to the precise impacts on trade arrangements with the EU and all the associated Customs and transport implications, we can be certain that life will continue and we will be prepared and will adapt! For now, DACHSER UK remains on its current course.
In other words, we will still gear ourselves up for a rise in exports and imports to and from Europe. In doing so, we offer our customers a strong, comprehensive, and centrally controlled European network that reflects our skills and expertise in Europe. In light of what changes may be on the horizon, this gives us opportunities to reshape how our freight services between the UK and the EU fit into our network, with a view to optimizing any new Customs procedures for handling cargo. On both a local and a central level, we have the necessary expertise in Customs processes, and we are actively involved in Customs procedures for overland shipments into and out of non-EU countries within our network. Our customers can rest assured that we will continue to flexibly adapt our operational processes and services to accommodate legal requirements and market forces. That includes the provision of warehousing, Contract Logistics and value-added services, in both the UK and Europe, for our customers who may wish to hold stocks of their products in closer proximity to their own consignee markets. Our focus is always on specific customer requirements and the best and most efficient ways to meet them. If time comes to adopt binding rules, Brexit may of course cause significant change for the movement of goods.
For a while now, the UK government’s Brexit plan and negotiating position has ruled out remaining in the Customs Union and the Single Market. On that basis, transporting goods in and out of the UK would be very likely to become more complicated and take longer. In scope of and at risk from this increased trade complexity would be not only straightforward imports and exports of goods, but also the hugely integrated and seamless UK/EU supply chains which have developed across so many different industry sectors over the course of some 25 years of ‘no borders’.
A recent study by consultancy KPMG explored just how vulnerable carefully balanced supply chains are to systemic change, taking the port of Dover as an example. The ‘short-sea Straits’, including the port of Dover and the Channel Tunnel, are the transport conduit for some 90% of UK /EU trade. According to KPMG, a delay of just two minutes when importing or exporting through Dover would lead to traffic to the port backing up for up to 27 kilometers. There are few, if any, truck parking facilities. If the waiting time for the release of trucks at Dover were to be eight minutes, the line would stretch all the way to the outskirts of London!
Until things are settled, it’s business as usual
Scenarios like these have prompted industry groups such as the Confederation for British Industry (CBI) to move against the government’s plan and lobby pro-Brexit politicians for the UK to stay, in some form or another, in the Single Market and the Customs Union. But will they manage to change politicians’ minds? Meanwhile, there is broad EU/UK agreement that - despite continued reticence from the ‘Brexiteer’ UK politicians - from the end of March 2019 to the end of December 2020 - and possibly even longer - transitional arrangements will mean “business as usual.” During this period, there will still be free movement of goods, services, capital, and people; meanwhile, trading and technical standards, as well as all other aspects of trade, will be aligned in such a way that the UK is effectively still a member of the single market and customs union.
Until the basic framework and decisive points of the new Customs and trade agreements between the UK and the EU are settled and made public, companies cannot meaningfully start the process of adapting their systems, administration, finances, and legal status. The same goes for how they adapt and organize their European procurement and supply chains, all in an effort to be ready for rollout of the “new agreement” at the end of the transition period. Industry continues to hang on to the hope that, whatever arrangements will eventually be agreed, trade will be able to continue with as few barriers as possible, reflecting the ‘frictionless trade’ ambition and mantra which is regularly promoted by Prime Minister Theresa May.
‘The Devil is in the Details’
As the saying goes: the devil is in the detail. I am sure that those negotiating on both sides will continue to have a tough road ahead of them. The debate about whether we can expect a ‘hard’ or a ‘soft’ Brexit has moved on. Now the political agenda is much more about avoiding a catastrophic “no-deal departure” , and aiming for a broad and creative trade agreement that would maintain many elements of the freedoms the UK enjoys as an EU member, but without full obligations and, inevitably, without all the benefits. EU politicians and negotiators have already firmly rejected overtures to such cherry picking.
The situation does raise several questions of course about the future of logistics in the UK: What will the new border look like? What about Customs procedures? How will the ‘border question’ on the island of in Ireland be dealt with? Would UK-EU customs procedures differ from the current processing of third-country shipments from, say, China? Can we expect a similar, but simplified process? How realistic is the talk of an ‘electronic’ border, whereby the clearance of EU/UK goods would be disconnected from their physical flow, migrating to an audit-based retrospective process in a way that could largely secure the objective of ‘frictionless trade’. And would the EU reciprocate? The list of questions is extensive and constantly evolving!
At the moment, we cannot predict exactly how Brexit will develop. Our belief, both now and in the future, is clear and unshakeable: logistics connects markets and builds bridges between them. No matter what the future holds for the UK.