Post-Brexit Business: How Will Shipping and Logistics Be Affected?
If you own or manage a business in the UK or Europe that uses domestic or international shipping services, Brexit will almost certainly affect your future shipping activities. The nature and severity of the effects will depend upon what (if any) exit-deal Britain and the European Union are able to thrash out.
Before you can speculate about the impact on your business though, you first have to have some idea of how Brexit will affect the freight shipping and logistics industries, predictions for which are impossible to make with any degree of certainty, despite B-Day being just a few months away.
However, it is possible to summarize the possibilities, which is what we've set out to do in this brief article. In so doing, we share no opinions on the possible outcomes, but merely highlight some of the potential changes to shipping and logistics in the wake of the UK/EU divorce.
Delivery Lead Times May Lengthen
If your business imports inventory from Europe, you may be accustomed to very short delivery lead times. Perhaps this has even become a critical element of your operations. If so, you should certainly be planning for new scenarios in which the UK and Europe become separate trading entities. Even if Brexit results in a free trade agreement with the EU, UK businesses are unlikely to enjoy the truly borderless international shipping experience that they do today.
Customs Checks and Cargo Inspections
Roll-on roll-off (Ro-Ro) traffic plays a major role in the transportation of goods between the EU and the United Kingdom and is likely to be affected much more than container shipping, although there will be impacts to both transportation modes.
A huge volume of UK freight shipping from the EU takes place using Ro-Ro vessels, but in a number of possible Brexit scenarios, trucks that can currently drive straight off a ship and continue their journeys by road, will instead need to wait while customs agents check paperwork and in the worst cases, physically inspect their cargo.
Any discrepancies in customs documentation will potentially cause longer delays, as customs will hold the cargo until issues have been resolved. This all adds up to an increase in lead time for international shipping from Europe to the UK, and if your UK-bound goods travel through the EU from third countries, bottlenecks at ports could well slow those down too.
The Cumulative Effect of Border Control on Journey Times
The current average time taken for vehicle checks (for goods traded with non-EU countries) at the UK border is around 20 minutes, according to a London School of Economics article about the impact of Brexit on product prices. It’s reasonable to hypothesize that post-Brexit inspections of vehicles carrying goods from the EU will take a similar amount of time.
Meanwhile, checks on outbound vehicles carrying exports to Europe, which currently take around 2 minutes at the key UK port of Dover, could take at least 2 minutes longer after Brexit. That may not sound like much, but the cumulative impact could potentially lead to five-hour-long queues on roads leading to the port, and to the nearby Channel Tunnel entrance. Similar issues could affect ports on the European side as well.
Longer delivery lead times appear to be almost certain after Brexit, so you may need to think about the lead times you will offer your customers. If you rely on just-in-time deliveries from Europe for a production or manufacturing process, there is a very real possibility that you will need to start holding some buffer inventory to keep production lines running in the event of delivery delays.
UK Domestic Freight Transportation May Cost More
Unless Britain and the EU reach a deal that involves completely open borders, without customs or other checks on imports, and without the application of tariffs, you can expect the cost of domestic freight transport to increase.
As some domestic freight forwarders and logistics companies in the UK also operate within Europe, they may incur higher labor and administrative costs due to changes in customs processes. There may also be extra costs involved in the operation of UK-registered trucks in Europe and vice versa.
Drivers’ Wages May Rise
Labor availability too could become an issue for British logistics companies, because currently, 10% of the UK’s commercial drivers are migrants from other EU countries. If post-Brexit changes make it difficult for Europeans to live and work in the UK, hauliers and carriers may face an abrupt worsening of the driver shortage that the European logistics industry is already suffering from. As a result, wages may have to increase—another factor that could hike the cost of domestic freight transportation.
Fuel Prices Could Increase
Any introduction of tariffs may increase operating costs for transport companies, perhaps even having an impact on fuel prices. If the price of domestic freight transportation increases, then you can expect this to have an impact on your overall shipping costs if your business is in the United Kingdom, even if you only trade domestically.
Speculation is Still the Only Option
B-Day arrives on 29th March 2019. That’s a little over four months away at the time of writing this article. At this point, there is no clarity as to the circumstances under which Britain will leave the EU, much to the distress of professional bodies such as the UK’s Freight Transport Association (FTA), which believe that it’s now too late for any deal to prevent disruption for the logistics industry.
Given the lack of information, an article like this one can do no more than speculate, with the aid of Shipa Freight’s industry knowledge, as to what the outcomes may be for shipping and logistics.
Any, all, or none of the possibilities we have presented here could come become reality, but at least with knowledge of the possibilities that exist, you can perhaps anticipate a range of scenarios for your business and begin putting together some contingencies for each.
Whatever the outcomes of Brexit may be, Shipa Freight can help your business with affordable international shipping between Europe and the UK. Sign up on our platform now—it’s free and only takes a moment.
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