Amidst the chaos and uncertainty of the outcome of Brexit, what can we see being the impact of the UK’s departure from the EU? The short term impacts on Brexit can be seen at UK ports even now, but the long term really is uncertain. Let’s look at what experts in the industry say today.
Short term - stockpiling
In an October 2018 blog we at Buy from China Now reported, “recent social media comments and newsletters regarding the very real problems of port congestion and haulage knock-on effects have made National Industry news recently.”
UK companies that rely on imports are stockpiling goods, and this is multiplying the problems in UK ports even now. In the same blog we said, “Truckers are booking ahead by some 2-3 weeks in advance, so forwarding companies are having to strategically plan for the same. You can imagine the number of amendments required when a ships ETA changes, as a consequence of working this way. “
This disruption is being magnified as the shipping industry goes into overdrive as UK importers stockpile ahead of the unknowns that will occur at the end of March when the country comes out of the EU in a ‘hard Brexit’ with no agreement or a ‘soft Brexit’ with some sort of political agreement.
Uniserve Group is an independent logistics and trade management provider. Its Sea Freight Director Steve Ireland reported this week, “Short-Sea container volumes between Europe and the UK are significantly increasing as an economical alternative to road freight services. This week, one short-sea shipping line has been reported to be introducing a pre-Brexit surcharge for all shipments involving the UK, due to the increased demand.”
Air freight is seeing the same problems as companies try to circumvent seaport issues. When Chinese imports return to full speed in the coming weeks after the New Year break, this is set to compound backlogs at UK ports as the same trucking companies with the same driver shortage that struggled to meet demand even before the hiked demand of pre-Brexit stockpiling.
Longer term issues
You would have to be some sort of mystic to have any idea as to what will happen after March 29 right now. With the UK government, Parliament and EU at loggerheads there is really no way of seeing whether a transitional agreement between the UK and EU will happen, though the Chancellor Philip Hammond is said to have reassured business contacts that there absolutely will be no hard crash out of the EU on the date (though again this has been refuted by the Prime Minister!).
Let’s look at some agreed probabilities in the event of an increasingly likely hard Brexit:
There will be disruption when it happens. Logistics solutions provider Banks & Lloyd advises, “It is unknown what the level of disruption at major UK ports will be, but we expect immediate short-term disruption whilst the UK adjusts to life outside of the EU, in the event of a “no-deal Brexit”. It is recommended that our customers ensure they have the appropriate steps in place to cope with potential severe delays to their goods entering the UK, and have the correct stock levels to deal with any delays.” This would compound the problems we see today - and could take UK inbound logistics to breaking point.
A New Statesman article indicated, “As a net importer, the UK is vulnerable to any depreciation in the value of its currency and will need a plan to navigate past potential tariffs.” Sterling could devalue by some margin. This will increase the cost of imports for UK companies, and potentially see a readjustment in the shape of its inbound trade flows. At the New Statesman round table, Rain Newton-Smith, chief economist at the Confederation of British Industry said in this regard, ““the volatility of sterling – the pound dropped to a 31-year low after the Brexit vote to $1.20, but has since recovered to $1.40 – was having “some mixed effects for SMEs”. She said: “The weaker exchange rate has led to higher inflation.””
If the standoff between government and Parliament continues, and there is a ‘hard Brexit’ that could cause significant problems, and those are starting to be felt even now.
In the UK there’s a saying that ‘today’s news is tomorrow’s fish and chip paper’. This is very much the case in the fast moving, chaotic Brexit situation at present. We join the voices of those saying to prepare for the worst case scenario that is increasingly likely, but to remember that somehow the chaos could completely abate - how is anyone’s guess as the clock ticks down to March 29’s formal Brexit date.