According to industry association Logistics UK, about 200,000 UK businesses trade with Europe at present. On 1 January, the UK will be out of the European trade framework it currently operates in and whether a deal will be struck between the two parties or not, the logistics sector is poised to face increased costs, disruption and bureaucracy.
The latter requires time to prepare and adapt to as new norms will apply, and new paperwork will be required to move goods across borders.
Partly because of the drawn-out negotiations between the UK government and the EU, industry players are concerned that businesses have either postponed or put in place inadequate measures to ready themselves.
Many UK retailers and businesses have already started stockpiling goods, fearing shortages and higher prices. Queues have started to form at key ports, including Dover and Felixstowe, as checks come into place and the possibility of a no-deal scenario feels more likely by the minute.
At present, the UK’s main trade partner is the EU. While the UK government is in talks with a number of countries, including the US, for a post-Brexit deal, to date it has only signed deals with Canada, the Andean trade bloc (Colombia, Ecuador and Peru), Central America and Cariform (the negotiating arm of a bloc of 15 African, Caribbean and Pacific states).
According to trade data from the UK government website, none of these countries ranked among the top 10 for UK exports and imports for the period between the first quarter of 2018 and the third quarter of 2020.
The charts below show that the US, Germany and Ireland are the UK’s top three export partners, while Germany, China and the US are the top three partners for imports.
Food trade flows since January 2017 have been relatively stable, but this is a sector whose future is highly dependent on whether a deal is struck between the EU and the UK and one in which disruptions will be felt by consumers.
How prepared is the UK logistics industry?
With uncertainty abounding, trading companies and logistics operators have multiple considerations to account for as they try to prepare for the new post-Brexit realities, whatever they might be.
For example, all importers and export traders will need to ensure they have import and export paperwork and systems ready, whatever the outcome of the political negotiations.
“In addition, hauliers will need to understand and be able to use at least eight new IT systems to make roll-on, roll-off trade move efficiently – there are four separate systems required by the UK government and one for each of Ireland, France, Belgium and the Netherlands. All will take time to install and learn and should not be left to the last minute,” Elizabeth de Jong, director of policy at Logistics UK, said in a note in August.
“Businesses need to ask themselves if they have considered how they will make declarations to [the UK tax authorities] and whether they will employ an agent. It is also important to consider whether they can, and would, benefit from using any available simplifications or deferred customs declarations for standard goods,” she added.
However, reports on the ground are not encouraging. Philip Storer, director at IPP UK and Ireland, a pallet pooler company serving the retail and industrial sector supply chains, says the process is frustratingly slow for many businesses
“We still see companies whose preparations are as last minute as the negotiations between the UK and EU to find a late accord on a trade deal – often because the arrangements from 1st January are still unclear,” he explains.
“Many logistics businesses have produced advice document checklists for all trans-European traffic post-31st December, because of the need to keep goods moving. Northern Ireland, for example, will require electronic import entry via the Trader Support Service (TSS), a free-to-use platform via a portal that is not live at this point, that is essential for all traffic between the UK and the island of Ireland,” he adds.
There is a whole host of acronyms to get to grips with.
With such a high level of new bureaucracy expected, a clearer and speedier negotiation process between parties is desirable and Logistics UK is urging both sides in the Brexit negotiations to focus on achieving a consensus to protect economies on both sides of the English Channel from the impact of a potential no-deal outcome.
“Business needs and deserves certainty over the terms in which the economy will operate from 1st January, 2021 – this further delay to the talks between the two sides leaves international hauliers and traders in limbo, with little or no time to implement new business processes. Logistics is agile and flexible but is running out of time to make the necessary transition to new trading arrangements,” de Jong stated.
Brexit challenges for the wooden pallet industry
While the codes and paperwork mentioned above will be a common issue for the entire logistics industry, there is a wide range of more sector-specific challenges that the it also needs to bear in mind and that are likely to be off decision-makers’ radar.
IPP’s Storer explains how the wooden pallet is one of the oldest and most sustainable methods of shipment. IPP, he says, operates an established circular reuse model that is efficient and environmentally friendly.
“But from 1st January 2021, flows of goods between Great Britain and the EU and Northern Ireland must be carried by wooden pallets that are heat treated in accordance with ISPM15 regulations. This is because the UK will fall outside of an exemption for flows within the EU,” he adds.
“Despite the fact that the risks that these regulations guard against [are] being unchanged by Brexit, the wooden packaging sector and the fast-moving consumer goods industry will need to bear the significant cost of this change, while the environment will bear the impact of millions of pallets needing to be heat treated in kilns.”
The pallet industry is working to ensure that there is availability of heat-treated pallets but there remains in general a residual risk of shortages.
The industry, through its trade body Timcon, has been in discussions with the UK government to ensure there are enough heat-treated pallets available to prevent unnecessary supply chain delays.
There will be similar challenges to most other sub-sectors of the industry that will need to be accounted for and which will compound the already heavy load of paperwork that Brexit will bring with it.
Will common sense prevail on Brexit for the logistics sector?
Neither the UK nor the EU would benefit from a no-deal outcome. However, hopes of finding an agreement dwindle by the hour.
“Both sides should be seeking to avoid tariffs which would make everyday household items we import more expensive, some by up to 30%,” warned De Jong. “Without a deal, the cross-Channel logistics sector cannot function. With no agreement currently in place for heavy goods vehicle access to and from the EU, many logistics companies cannot be certain if they can operate in 2021 and cannot plan their work. This puts the country’s entire supply chain at risk,” warns Logistics UK’s de Jong.
IPP’s Storer is not very optimistic. “There has always been a group of pragmatists that hope that common sense will prevail, and a sensible compromise will be reached to agree a process-light, tariff-free continuation of a mutually advantageous trading relationship between the UK and the EU. Sadly, it appears that common sense is far less common than we might reasonably expect,” he says.
Regardless of whether negotiations will be successful in obtaining a new trade deal between the UK and the EU, customs clearance issues will be in force and that alone will be a game-changer for the logistics and supply chain industry.
The wider implications for the entire supply chain sector are expected to be significant as the additional costs will have to be passed to customers and, ultimately, end users and consumers.
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