Whether it is a ‘no deal’ or a ‘soft Brexit’ with a trade agreement – logistics experts prepare for all scenarios. the degree of change depends mainly on ongoing negotiations, but the future trends and expectations are already visible.
The Brexit negotiations are entering a crucial phase: when the UK withdraws at the turn of the year, customs declarations, export conditions and tax arrangements between the EU and the UK change significantly. These changes will be guaranteed, whether both parties agree on a trade agreement by then or whether the minimum standards of the World Trade Organisation (WTO) will automatically apply when a hard Brexit enters into force. A look at the statistics shows the enormous extent of the impending change. At present, around 70% of all goods sold in England, Scotland, Wales and Northern Ireland are imported. Half of the imports in 2019 came from the EU, with a value of EUR 304 billion. Imports from countries outside the EU amounted to EUR 311.9 billion. Over the same period, the UK exported goods worth around EUR 193.7 billion within the EU and EUR 217.3 billion outside the EU.
A hard or soft Brexit: automation of customs services
In the event of a hard Brexit, customs formalities for trade with EU countries would increase dramatically. If the UK becomes just a ‘third country’, the number of customs duties will increase enormously. Last year, British companies had to fill in five million customs declarations. In the case of a hard Brexit, this number rises to 400 million, an unprecedented increase of 8000 percent.
The nature and extent of customs formalities depend on the existence of a free trade agreement, and a Brexit without that trade agreement is expensive. At best, the UK gets off with little scratches. If there is an agreement, customs formalities can be restricted. In a no-deal scenario, however, products may remain in storage longer because complex customs declarations have to be completed. Companies must keep matters in their own hands and automate customs declarations in advance. Anyone who starts the New Year unprepared will suffer a severe blow on 1 January.
A consequence of the Brexit which is not immediately thought of, but which must be taken into account, are the inevitable traffic jams between Calais and Dover from 1 January 2021. Whatever the fine print in the new customs regulations, a bumpy start and long waiting times for road transport are a guarantee. Where possible, other destinations in the UK should be chosen, in particular in January and February, in order to avoid the congested connection to Dover. Ports of London Gateway, Tilbury, Harwich and Newhaven are good options.
Of course, driving around doesn’t work for every load. Fresh flowers from the Netherlands or fruit from the Mediterranean region are not made for the long detour. Equally problematic is the fact that a heavy load costs every additional kilometre. But for many companies, the crisis also offers an opportunity to make the supply chain more flexible and therefore crisis-resistant. Examples of this are the joint use of containers or increased cooperation between shippers, logistic companies, freight forwarders and customs agents in route planning.
The Brexit has many question marks. We are looking at the actual results with a critical eye, not least because experts say that the UK Government cannot afford that products will no longer be available by 1 January 2021. In order to be ahead of that scenario, one can already see a clear trend towards the complete filling of the English warehouses. Companies with long-lasting goods have recently scaled up their exports to the UK to get as many goods as possible there. But for fresh products this is simply not possible. The biggest problem is expected for these goods, which may lead to empty shelves – if there is a bad deal – as a result.
Note to be taken of the development that we are now seeing is that carriers and companies of long-lasting products are scaling up enormously, but will have a serious dip in January. Then the huge amount of exports suddenly disappear and you see another situation. For suppliers of everyday products, the question remains whether the English government is going to prevent empty stores.
The Brexit has a lot of ambiguities, questions and’ what-if ‘ scenarios. There is no cause for panic yet, but there is a need for preparation. We may not yet know exactly what needs to be done and how to anticipate this, but it is clear that organisations affected by this need to create additional capacity. As logistics, are we ready for the Brexit? On the basis of what we know now, we are well prepared, but with the ongoing negotiations, the outcome may suddenly be different. But even then, we’ll be able to switch quickly.