As we enter a critical phase of negotiations after two years of Brexit talks, the UK’s future relationship with the EU is still unclear. What’s certain though is that, following the triggering of Article 50, the UK will be leaving the EU on 29 March. Whether that departure is a ‘soft Brexit’ or a ‘hard Brexit’, the global logistics industry will be significantly affected. Indeed, since last summer, commentators within the industry were already stating that it was ‘too late’ to avoid Brexit disruption.
The biggest risk to supply chain management
A hard Brexit would mean the UK leaving both the EU Customs Union and the EU single market, with full control over its borders and the possibility to make free trade agreements on its own. In a soft Brexit scenario, the UK would remain close to the EU single market, with its primary concern to secure tariff-free agreements on goods.
Both scenarios would impact existing supply chains, disrupting EU-UK cross-border trade. It’s widely accepted that the issue of logistical slowdown will be the biggest risk to supply chain management: additional documentation, customs checks and border congestion will frustrate the flow of goods, leading to increased shipping times for both inbound and outbound logistics.
In an online article, SHD Logistics News comments on this potential problem: ‘Whereas before all that was required of a package was a quickfire scan to pass through customs, more time-consuming procedures will be put into effect on each delivery to authenticate them.’ As a result, most shipping lines, port operators and freight forwarders have already begun to create alternatives.
The rising costs associated with Brexit
A major concern for the logistics sector is the issue of rising costs, especially that of fuel. The UK relies heavily on imported natural resources, and Brexit could influence price hikes on goods entering the UK from EU countries. Export costs would rise as a consequence and higher costs will have a ripple effect throughout the logistics industry. Logistics firms would most likely pass these increased costs on to their customers.
Another key issue is the right of residency for EU workers in the UK. This is a significant concern for the logistics industry as there is a reliance on experienced foreign workers (reports suggest that around 10% of commercial drivers in the UK are from other EU states). A Brexit deal that restricts EU nationals working in the UK could result in a substantial gap in the workforce. Avoiding a nationwide ‘talent drain’ will be a priority in preserving the ongoing health of the logistics sector.
A positive outlook for post-Brexit logistics
It’s important to remember that the logistics industry is extremely resilient and has proven in the past that it can adapt to any global challenge. Many commentators highlight the positive potential of Brexit and the opportunity for the UK to establish itself as a global trading nation. The Week reported how Brexit will be ‘a catalyst for a massive change over the next few years in the way that transport works, as well as in the way that our lives will look and feel in the future’.
Uncertainty about labour, for example, has encouraged businesses to examine the potential benefits of using artificial intelligence and digitisation. Supply & Demand Chain Executive magazine suggested: ‘While Brexit represents an unravelling of the political and economic patchwork of Europe, digitisation promises to connect businesses together, reduce trade friction and fuel collaboration and commerce.’ Joining a digital business network can reduce the risks and costs of being outside the EU and the Customs Union.
It’s also important to note that, despite Brexit-related uncertainty, the logistics sector remains broadly positive, with three quarters of logistics companies confident that their businesses will grow over the next three years. Regardless of your political stance on Brexit, your business should be optimistic that the logistics industry will emerge from it strongly.
This is our key advice for minimising the impact of Brexit:
- Review your current supply chain network setup
It’s imperative for organisations to have a clear, refreshed picture of inbound and outbound flows.
- Review your supplier base
Companies should actively communicate with their suppliers and review their preparedness for Brexit.
- Identify alternative routes for EU-UK shipping connections
Determine and evaluate the potential of utilising different routes, depots, distribution centres and ports.
- Keep up to date with new regulations and developments
Monitor key developments to understand future trade agreements and how they will affect your business.
Sprint Logistics is a global company providing worldwide supply chain, fulfilment, distribution, storage, mass mailing and ecommerce solutions. We pick, pack and ship thousands of parcels around the world every day and we’re committed to ensuring your logistics operations run smoothly, using our expert knowledge and world-class technology.
If you have any concerns over Brexit and how it will affect your company’s logistics and supply chain management, contact us now.