Following on from the EU Referendum and the UK’s overall decision to leave the European Union, many businesses are now faced with a single, monumental, question – how will this affect my business?
The reality is that there is no certainty as to what degree the ‘Leave’ decision will have on the economy and the market, leaving us as a nation in relatively unknown territory.
While we unfortunately don’t have all of the answers, we do know that Brexit will of course have an effect on nearly every business.
The FTA developed a Brexit strategy back in July of this year. They have highlighted several key areas that are crucial for the Freight Trade Industry.
So the vote is in, what happens next?
In short, nothing changes for freight transport operations until exit negotiations have been completed. The Government will first need to give official notice to leave the EU (a notification under Article 50), before formal exit negotiations can start.
These negotiations will be incredibly complex and the FTA’s job will be to lead for logistics and make sure the Government keeps the UK’s supply chains efficient and competitive, whatever deal is agreed.
What’s the value of the UK’s trade with Europe?
The EU is a major trading partner for the UK; the value of our trade with the Union stands at nearly £360 billion!
- 47% of the goods and services we exported in 2015 went to the EU, whilst 54% of our imports came from the EU.
- Over the last 10 years, exports of goods to the EU from the UK rose 9.2 per cent, from £123 billion in 2005 to £134.4 billion in 2015
What are the options for Britain’s future trading relationship with Europe?
What will the new trade deal look like? This is at the heart of what the Prime Minister will need to negotiate with the EU. Although it is likely the UK will negotiate it’s own deal, these are some of the current models that apply to other countries:
Norway – Are within the European Economic Area (EEA) with almost full access to the Single Market (and accepting free movement of people). It enacts all EU laws as a condition of its access to the Single Market, and contributes to the EU budget.
Switzerland – Currently have bi-lateral deals with the EU. Switzerland implements many EU rules and contributes to EU funding programmes.
Turkey – They are outside the EEA but in a Customs Union with the EU since 1995. Turkey implements the EU industrial standards.
Canada – Currently a bi-lateral trade deal is being negotiated with the EU (CETA – EU-Canada Comprehensive Economic and Trade Agreement).
Russia – Have a new EU-Russia agreement is in preparation, building on WTO (World Trade Organization) rules.
What will be the tariffs, the guarantees and the clearance procedures exporters and importers will need to follow?
These will decide how well the new trade works in practice for supply chain managers and shippers. The degree of access to the Single Market will, to a large extent, determine the customs tariffs, procedures and administration that will apply to imports/exports at the EU border.
What will happen to domestic transport legislation?
Depending on the deal reached with the EU, the Government may decide to revise the UK transport legislation that is based on EU directives and regulations. What would be kept and what would be scrapped? For example, will international hauliers have to learn two set of rules, one for when their trucks are in the UK and another for when they are in the EU?
What about enforcement for UK vehicles going into Europe?
Documentation required accompanying goods, vehicles and drivers will need to be unambiguous and universally accepted to avoid arbitrary enforcement and penalties being imposed. The UK industry will need to remain vigilant against unilateral decisions adding red tape to cross-border movements.
Current experience suggests that international hauliers are indeed vulnerable to unilateral action by enforcement authorities in EU member states, for example the evidence of payment of the minimum wage required in France and action over the registration of trailers in Germany.
The enforcement of whatever new rules are agreed has the potential to become a major cause of delay and burden for international movements. This means that getting clarity on what documentation for goods, certificates for trucks and licences for drivers are required is a crucial element in making any new trade arrangement work in practice.
Opportunity for a decreased fuel duty?
Fuel duty increases have been in the Treasury’s sights before but FTA-sponsored research shows that reducing fuel duty would give a real stimulus to the economy and would give logistics a competitive edge in a tough new trading environment!
What about global imports and exports?
Trade is an exclusive competence of the EU, meaning that trade deals are negotiated at EU level on behalf of EU member states, rather than at national level. The UK will therefore need to negotiate new trade deals with the rest of the world to ensure that it can keep trading under favourable conditions.
Post-Brexit, it will be more important than ever for the UK to trade more with the rest of the world but changes in the container shipping market mean that the biggest and most efficient container ships are calling less frequently at UK ports, meaning goods having to be trans-shipped from mainland Europe. This means there is a case here for more investment in our ports and the road and rail links that connect them to increase their ability to handle bigger ships and larger volumes of containers.
Initially, those engaged in international European and global supply chains will feel the effects of any new requirements. Much will depend on the conditions for UK access to the Single Market.
In broad terms, the UK has well-developed institutions governing the transport sector, and market liberalisation is well developed compared with many other member states.
The UK, as a centre of excellence for shipping services, will continue. Whether it remains as attractive to foreign investors or entrepreneurs, especially from the EU to establish and conduct business here, is uncertain. As our former Prime Minister David Cameron said ironically, he would attempt to ‘steady the ship,’ we won’t know for some time what the real effects will be.