The immediate aftermath of Britain’s departure from the European Union has resulted in unprecedented hardships for the transportation and logistics industry in both the UK and the EU. As 2021 has come to an end the full impact of Brexit on transportation and logistics is becoming apparent.
As the industry started to recuperate from the effects of the pandemic, the consequences of Britain’s departure from Europe are becoming more noticeable. Last year, the UK experienced an acute shortage of truck drivers that bought the logistics sector to a halt. Even in 2022, the short supply of workforce is all set to disrupt the already strained supply chains. Moreover, the retail stocks are unusually low because of delays in orders. Simply put, the post-Brexit commercial reality is hindering the efforts of this industry to resume its normal operations and thus threatening the post-pandemic recuperation. Keep reading this post to get a brief overview of the impact of Brexit on the European supply chain.
Key impacts of Brexit on the transportation and logistics industry
A decline in commercial activities
The UK’s commercial transaction with the EU is on the fall with several companies having to deal with checks and customs documents. Since October 2021, Britain’s trade with the EU was 15.7% lower than usual. Moreover, this figure will further rise as the UK is yet to impose many of its post-Brexit border controls this year. Starting this month, imports from European nations will be needed to come with customs declarations. Additionally, food items will require extra physical inspections. The trade deals of Britain with New Zealand, the USA, and Australia are expected to somewhat mitigate the problem.
Additional expenses for UK exporters
The fact that Brexit is adding to the freight costs of exporters in the UK has become more than apparent. Moreover, there has been an increase in freight expenditure from January 2022. John Lucy, the Head of International Transport at the UK Road Haulage Association aptly sums up the situation: “UK export freight costs have been traditionally low. This has since turned on its head, with the price for EU export loads from the UK now in uncharted territory. The number of empty trips from European hauliers is increasing, because they are not prepared to pick up return loads. The upshot is a reduction in supply subsequent increase in freight rates from the UK to the EU, which in turn has increased import freight costs since EU hauliers are pricing it up as a round trip.”
Shortage of workforce
The delays are not happening just because of the trade barriers. Brexit has had a significant effect on the number of immigrants. Following the Brexit, a great number of workers have departed from the UK. Furthermore, the pandemic has also stalled the training process of new workers. In other words, there is a severe shortage of workforce that is very detrimental for the transportation and logistics industry.
Following Brexit over 200,000 European nationals departed the UK in 2020. This naturally triggered an extreme shortage of staff while leading to the much talked about fuel crisis and the shortage of truck drivers. Added to that there was also a shortage of warehouse staff. The multinationals like DHL, and Amazon are offering special incentives to recruit more workers. The workforce crisis has even prompted certain companies to call on the authorities to widen the scope of interpretation of Brexit so that they can easily recruit workers and retain productivity.
Increased transit time between the UK and the EU
The customs requirement and paperwork have taken a toll on the transit time from the UK to the rest of Europe. This is particularly true for freight moving between the UK and Ireland. Additionally, the impact on groupage deliveries has been particularly worrying. For example, the double-deck trucks can come with 50 pallets. This implies 50 times more paperwork. In the event of inaccuracies in any of the pallets, the entire trailer has to wait until that one item’s documentation is resolved.
Order delays and supply shortage
As a result of all the above factors, Britain is experiencing a supply shortage. This shortage has become all the more palpable in the catering industry. It has taken such a threatening proportion that giants like McDonald’s and KFC are deleting several items from their menu and even shutting shops to deal with the shortage of food products. Moreover, the automobile sector is also going through a difficult time. Its productivity has suffered because of a shortage of semiconductors and other electric components.
Reduced economic growth
According to records from the Office for Budget Responsibility, even before the UK formally departed from the EU at the end of 2020, the size of Britain’s economy shrank by almost 1.5%. This was because of a decline in commercial investments and the shift of financial activities to European countries in view of greater trade barriers.
As per the estimates by OBR, the fall in trade volume will result in a 4% reduction in the size of the UK’s economy in the coming years. However, among all the regions in Britain, Northern Ireland, has fared well. The rest of the country as a whole is struggling to recover from the double threats of the pandemic and economic slump.
The way ahead
In spite of all the challenges the transportation and logistics industry is having to face, the road ahead is not so dismal. To begin with, the digitization of customs documentation will greatly reduce transit time and make the processes more efficient. Moreover, the UK-based companies need to rely on their network infrastructure in the EU. This will allow them to lower the administrative burden and quicken deliveries. The solution lies in overstocking the distribution centers in Europe so that they distribute directly to the consumers from there instead of sending items from Britain. Lastly, the trading operations are going to ease up once the checks start from the UK side later in 2022. Presently, the situation is a mess as the grace period is helping all concerned parties to prepare for the changes. Once the UK starts making the checks the process will become much simpler and faster.