Published Tuesday 5th February 2019
At the time of writing, no agreement has been reached between the United Kingdom and the European Union regarding the future trading agreement once Britain leaves the EU. As the situation continues to develop, the likelihood of a no-deal Brexit occurring is increasingly likely. Once seen as the almost unfeasible worst-case scenario, many businesses are now being forced into protective measures in preparation for what may or may not occur before March 29th.
Brexit has affected nearly every aspect of business operation, particularly over the last twelve months. Its impact has been felt in the weakening UK labour market and lowered levels of investment, whilst many industries have cited it as the primary reason for a decline in growth and stalling national economy. However, many groups fear that the worst is still to come if no trading agreement is accepted.
Britain’s Unprepared Ports
One of the biggest worries in the event of a no-deal Brexit is the added strain on current UK import and export routes, particularly ports. In 2017, the UK imported around £341 billion worth of products and services, including a £95 billion trade deficit on physical goods. The European Union is still our major trading partner, accounting for 44% of all exports and 53% of all imports. However, the majority of this trade is carried over the sea, and the amount of ports frequently used is relatively minimal. The major UK port at Dover, for example, is responsible for around 17% of all goods trade.
Around 14,000 trucks, known as roll-on/roll-off freight, pass from the EU into the UK or vice-versa every day. Much of this traffic flows smoothly, thanks to the current trade agreements included with membership to the European Union. However, once that agreement concludes, and if no withdrawal agreement is in place, different systems will be required.
Many of the cargos that previously passed through UK ports without any checks will need to be held for processing. Whilst this sounds simple, the requirement for trucks and freight to stop for these checks could cause huge logistical problems for ports and other methods of entry. Currently, non-EU trucks passing through UK ports take around 45 minutes to clear, regardless if they have visited other EU locations beforehand.
A recent survey by Odgers Berndtson suggests that only 25% of UK port leaders feel prepared for Brexit, without mention of a potential no-deal scenario. Although the UK Major Ports Group contested that they are resilient enough to deal with added pressures, it is proving increasingly difficult for ports to prepare for the future agreement when its nature is unclear. More checks are an inevitability, no matter what the outcome, and a flurry of recent congestion-management strategies by the UK Government have not managed to defeat business fears over future goods movement.
The Business Response to Distribution Fears
Almost all major corporations have begun to engage in some form of supply contingency planning, under the expectation of delays post-March. The exact nature of these measures has differed slightly depending on the industry, but there are recurring themes throughout British business.
One of the industries expected to be hit hardest by these delays is the pharmaceutical industry, where regulation is detailed and constant throughout the process. Over 80 million drugs are transported across the UK-EU border every month, which will cause multiple delays through the chain as new checks are required. This has led to many major pharmaceutical companies, such as AstraZeneca, stockpiling products on either side of the expected divide. Similar stockpiling is happening in other industries, particularly manufacturing and retail.
The car industry is another sector expected to be hugely affected by any disruption. Due to the industry’s ‘just in time’ method of production, delays are forcing companies to change decades-old manufacturing habits. Alternatively, many major automotive firms are in the process of evaluating their development chains, with businesses such as Nissan and BMW looking at producing their vehicles and parts away from the UK as a precaution.
New Methods of Distribution
Ultimately, transport companies are also looking at ways of avoiding delays to their cargo and workforces. Many new ports across the country are expected to take extra significance, whilst major transport companies are already in the process of trialling new routes in and out of the UK.
It is clear that many businesses will be affected in some way by the changing trade routes following Brexit. With that in mind, many companies are taking the opportunity to evaluate their current distribution chains, in preparation for all scenarios. At ERA, we have helped many major UK companies reduce distribution costs for the long-term. Our experts can work with your business in areas such as couriers, mail and pallets and with your own fleet, helping to reduce the cost of your current procurement strategies. With Brexit on the horizon, why not get in contact with our experienced team today and see what savings we could create for your business?