Guest article: Three Key Factors That Could Be Shaken Up By The Impact of Brexit On Logistics*

Amidst the backdrop of negotiations aiming to decide the future of the EU’s relationship with Britain moving forwards, many businesses on both sides of the divide are felling sombre about what is to come. Even in the best case scenario for commerce to continue to flow both ways, the comfortable and familiar trading environment is no more.

From a European perspective, the British withdrawal is an undeniable blow. One of the EU’s most populous and wealthy members, it has always been a net contributor to the Union in many forms. Conversely with Brexit having been decided upon by such a slim majority, there are many within the UK unafraid to voice their opposition to this divorce so to speak, and the political dialogue is dominated by claim and counter-claim about how Brexit will either make or break the nation.

The Movement Of Goods

In line with many other Western countries, the UK’s imports of natural resources far exceed its exports. The country’s North Sea oil fields cannot meet its needs, and just over a quarter of all petroleum products used in the UK arrive through EU countries. Clearly, the prospect of the UK sitting outside the single market is of significant concern for those operating or investing in the logistics markets, since trade tariffs, higher fuel prices and increased commodity and finished goods prices could all combine to hamper economic growth. If fuel from EU member countries becomes more expensive, it’s inevitable that logistics firms will seek to pass on those increased costs to consumers.

Some progressive observers have been quick to point out that this scenario should, in fact, be seen as an opportunity for UK-based vehicle manufacturers to push forward with the development of commercial vehicles that use alternative fuels. Of course, environmentalists have been championing this approach for many years, but Brexit may well offer us a compelling financial incentive for reducing our dependence on fossil fuels. Developing transport solutions based on alternative fuels would have a twofold benefit: reducing pollution and lessening our dependence on imported fuel.

In terms of competition as well, there are already concerns that not only will UK businesses become disadvantaged, but EU-based rivals will seek to exploit this opportunity. For example in terms of exports, the UK currently leads Europe in terms of products derived from our sizable herds of sheep, chiefly meat and wool. This has led other European countries choosing to focus more on alternative sources of income from within the field, but this could very much change if companies in the UK are the victims of some kind of tariff. In turn not only will UK exports fall, but the opportunities for those within the supply chain will subsequently also suffer.

Worker Migration

EU nationals make up around a tenth of the UK’s commercial drivers, and the loss of this workforce would inevitably be felt hard within the logistics industry. With Brexit negotiations barely under way, many workers are already concerned about the way in which their residency status is being used in those negotiations, and are upping sticks to find employment elsewhere, in countries where they can be more certain of their future rights. The agricultural industry is already feeling the impact of many seasonal migrant workers looking for opportunities elsewhere, so there is a precedent for this eventuality.

This compounds a problem that is being experienced throughout the UK’s logistics industry – there is currently a huge shortage of British drivers, and demand for those drivers is at an all-time high. British drivers may find that this shortage helps to push up earnings, but there is no suggestion that it will help bring more people into the industry, leaving this skills shortage to grow and grow.

One possibility is that the UK government may target commercial drivers from across the EU, and around the world, with generous incentives to come to the UK to work. There has already been much discussion on how post-Brexit immigration controls could be used to attract skilled workers from overseas, and the logistics industry could well be one sector that is boosted in this way.

Custom Blockages

Unless the EU agrees to allow the UK to remain within the single market, in some shape or form, it is inevitable that customs controls will become much tighter and more evident than is currently the case, both for imports and exports. This will be particularly pronounced in Ireland, which is the only EU member to share a physical border with the UK. Northern Ireland and the Republic of Ireland currently trade freely with one another, and the trading volumes involved are significant. Unless an acceptable trading agreement is reached, trade and logistics between Ireland and the UK would be severely hampered, and the costs of this could run into billions of pounds.

The border with Ireland is just one of many complex issues that need to be resolved. The nature of the problem means that there is no easy fix, but at the same time, a decision has to be made as quickly as possible, in order to provide stability and certainty. It’s vital that both sides at the negotiating table approach this issue in a respectful and measured way, rather than viewing the process as a battle. There are potential pitfalls and opportunities for both sides, and it is to be hoped that this is recognised by negotiators, who will work towards a solution that is beneficial for all parties.

This contribution comes from Truck Locator, a UK based digital retailer of used haulage vehicles.

*This guest article was written in 2017. All the opinions belong to the author(s) alone and do not engage the owner of this website.