How will Brexit impact the European logistics industry?
As political heavyweights made their way to Brussels today for the second round of Brexit talks, British Brexit Secretary David Davis urged all sides to ‘get down to business’. The European logistics and supply chain industry will be hoping more than most that they do just that.
Justin Fox, writing for SupplyChainDigital.com on behalf of online truck marketplace Truck Locator, says that as talks progress, the earliest agreements could have profound implications later for key logistics industry players on both sides of the English channel.
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.
Importing goods into Britain from the EU
Britain, along with the majority of EU member states, has a service-based economy, which means that is has to rely heavily on the import of natural resources. Many EU countries are interlinked in their dependence on imports of fuel and petroleum products, with 27% of Britain’s petroleum products, for example, passing through the EU on the way to Britain. If Brexit negotiations result in Britain not being part of the Single Market, tariffs will be
applied to goods entering the UK from other EU countries, forcing those goods to become more expensive. Rising export prices will not be good for the exporting countries, or for Britain, and those higher costs are likely to have a ripple-down effect within the logistics industry. Ultimately, it will be consumers across Europe who feel this impact most acutely, as hauliers and logistics firms will simply pass on the increased costs to their customers.
Already, some industry thought-leaders are talking about Brexit as a potential catalyst for the alternative fuel sector, and are hoping that it will inspire truck and van manufacturers to invest heavily in R&D to build commercial vehicles that are not so dependent on traditional fuels. Lobbyists and campaigners have been fighting for this kind of approach for a long time, but it seems that Brexit might provide a financial incentive that is much harder for businesses to ignore than the long-standing environmental argument.
Freedom of movement
Residents of all EU member states are currently free to live and work in any other EU country, if they wish. Britain has long benefitted from this arrangement, with EU workers making up a significant percentage of workers in a wide cross-section of industries. For example, almost 10% of commercial drivers in the UK are from other EU countries. Whilst Britain once offered an excellent opportunity for drivers from other EU countries, many of those drivers are now looking back to the continent for work, as they fear they are being used as a pawn in negotiations.
The uncertainty surrounding residency rights for EU workers in the UK is compounding a pre-existing problem in the logistics industry: Britain, like many countries, is experiencing a shortage of experienced commercial drivers. If Brexit restricts the options for EU nationals to work in the UK haulage industry, it may well force earnings for British drivers up, but it remains to be seen whether that would be enough to encourage more young people to choose driving as a career.
One alternative possibility open to Britain is to make the logistics industry a targeted sector for overseas recruitment. The British government is already exploring ways in which it could avoid a ‘talent drain’ after Brexit, and singling out specific sectors for special immigration treatment may be one option.
Customs and border controls
Under the Schengen agreement, residents of EU member states enjoy extremely relaxed border controls, and are generally free to cross borders without being stopped. The Single Market also means that goods and services can be freely traded throughout the eurozone. Inevitably, when Britain leaves the EU, this will have to change, and stricter border controls will be reinstated between Britain and its EU neighbours. Nowhere is this likely to be more pronounced than on the border between Northern Ireland and the Republic of Ireland, which, of course, remains an EU member state. Trade between Northern Ireland and the Republic is strong, and it’s thought that border controls could cost businesses billions each year, with a knock-on effect felt throughout the logistics industry.
Whilst the border between Northern Ireland and the Republic of Ireland might be the most extreme example of the border control issues raised by Brexit, there will be similar issues across the whole of the EU. Clarity on the likely outcome of Brexit talks is needed urgently, but of course, it is in no-one’s interests to rush these negotiations.
For the European logistics industry, and for the wider economies of all member states, it’s vital that the talks are held in a constructive and progressive way, without any kind of ‘them and us’ mentality. All member states need the best possible outcome from Brexit, and it is to be hoped that negotiators can find a way to make the EU’s first real exit a success for all, with as little disruption and uncertainty as possible along the way.