By Kelly English, Senior Accounts Manager, Quality Freight Services.
In June 2016, British voters chose to leave the EU, sparking huge debate across Europe on how that exit could be achieved, and what the likely impacts would be for people and economies across the Union.
Of course, within each member state, opinions are divided about whether or not Britain’s decision to leave is a wise move or a disaster, but one thing is certain: the impact of Brexit on Europe’s logistics industry will be huge and could severely disrupt our island nation’s logistics industry by raising fuel prices, intensifying driver shortages, and hindering border crossings.
The decades-long status quo has, for the moment, been replaced by uncertainty. All eyes are now on the negotiating teams of both parties as they try to hammer out an agreement that hopefully makes provisions for businesses on both sides of the divide.
Yet, in spite of all the talk about fairness and mutual gain, there are a number of concerns being shared by many in the U.K. who fear for the future of their trade with Europe
Under all but the gentlest Brexit scenario, the reintroduction of some form of customs controls will be required. In particular, if the UK leaves both the Customs Union and the Single Market, which is the stated aim of the UK Government, customs controls will be required. Once the UK agrees tariffs with the countries that are different from those set by the EU there will be an incentive for traders to exploit the difference. Without customs controls the door would be open for this, and this would result in a loss of control of external trade policy – the UK would be the EU’s trade gatekeeper and vice versa. This will not be acceptable to either the EU or the UK.
Potential impacts on transport are not, unfortunately, limited to those at the border though. Fuel prices should be a particular concern since the country’s North Sea oil fields cannot meet its needs and just over a quarter of all petroleum products used in the U.K. arrive through EU countries. If fuel from EU member countries becomes more expensive, it is inevitable that logistics firms will have to pass on those increased costs, coupled with tariffs which could be applied to goods entering the UK from other EU countries, consumer goods will become even more expensive.
In some cases, however, there may be a silver lining to these trade barriers, as they could encourage innovation. For example, some observers have been quick to point out that the rise in fuel prices might, 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 the nation a compelling financial incentive for reducing its dependence on fossil fuels. Developing transport solutions based on alternative fuels would have a twofold benefit: reducing pollution and lessening dependence on imported fuel. Could we see Tesla-style eco trucks on the UK motorways of the future?
Will Brexit lead to driver shortages?
Another key concern for the logistics industry is that EU nationals make up around one-tenth of the U.K.’s commercial drivers. Even though Brexit negotiations are still ongoing, many EU nationals are already considering employment elsewhere in countries where they can be more certain of their future rights. The loss of this workforce pool would hit the logistics industry hard, as the existing shortage of commercial drivers in Britain is placing demand at an all-time high. While British drivers may find that this shortage helps to push up earnings, there is no suggestion that it will help bring more people into the industry. As a result, this skills shortage will only continue to grow.
There is no doubt that it is important for the UK to signal that it is still open for business but there are several issues that need to be resolved before it can start signing new trade deals. It is impossible to open up discussion about the full effect Brexit will have upon international trade dealings as it is all still very much unknown how the contracts will be hammered out.
Clearly, the prospect of the U.K. sitting outside the single market is of significant concern for those operating or investing in logistics services, since potentially altered trade tariffs, higher fuel prices, and increased commodity and finished-goods prices could all combine to hamper economic growth.
Kelly English is Senior Accounts Manager at Quality Freight Services. English’s 18 year career has included an operational and, later, sales role at Bradship. At Quality Freight Services she oversees the company’s involvement with the tile industry, a sector in which she has extensive experience.
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