Published 01 Oct 2020
Impact of Brexit on Logistics
Challenges in the logistics industry are expected to increase manifold with Brexit. The outcomes of Brexit may have big consequences on even the top companies in the logistics industry.
Whatever the form of the UK’s trading terms with the EU, and indeed the world, supply chains will recalibrate, and occupier demand will evolve. This will create chances for logistics and industrial real estate investors, which should closely monitor trade negotiations to position portfolios accordingly.
Brexit and Suppliers
Suppliers in the UK are increasingly stockpiling on medications and other emergency objects. Diabetes UK is a point in question, as 3 insulin suppliers already assured the charity that they will be holding insulin on stock to ensure continuous supply of at least 4 months.
This is hardly an option for businesses in other sectors, especially those operating in the field of fast-moving consumer goods. Such goods are, for instance, candies, toiletries, packaged and household items, and vegetables and fruits that have a relatively short shelf life. Suppliers of fast-moving consumer goods need reliable, timely, and continuous supply. This is not only because of short shelf life but also because of the lack of warehousing facilities to keep considerable quantities.
More storage facilities are required to keep goods as to ensure non-stop supply in case of supply chain disruptions. According to specialists, however, U.K. is slightly over 60 percent self-sufficient.
For logistics services providers, shipping huge amounts of goods over a short period of time means that they must push their supply chains to the limit.
Almost half of the UK’s exports are distributed to countries inside the EU. After Brexit comes into effect, this number will diminish and finally leave a dent in the UK’s GDP. It will result in major challenges in the logistics industry because a reduced amount of trade across mainland Europe will lead to a refuse in request for road haulage even if the rate of export remains unchanged.
Stricter Border Control
Brexit would cause about tighter border controls and create barriers at borders for the administration of trade in both directions. This can cause lower efficiency and add on to the challenges in the logistics industry due to which goods will move slower.
One of the possible knock-on consequences of Brexit could be harsher and tougher migration controls. This translates to lesser EU citizens working for UK- established companies. As a result, there could be a major influence on road haulage as it relies comprehensively on drivers belonging to other EU countries. This reduced capacity to recruit drivers could affect the industry’s ability to serve the economy.
Rising operating costs
Another way Brexit increase challenges in logistics industry is through the rise in operating costs. Fuel prices are also a major area of concern for logistics companies. Experts at Infiniti Research agree that the biggest influences on fuel costs are the global oil price and the fuel duty imposed by the UK government.
Importing goods into Britain from the EU
Britain, alongside with the majority of EU member states, has a service-based economy, which means that is must rely heavily on the import of natural resources.
EU countries are interlinked in their reliance on imports of fuel and petroleum
goods, with 27% of UK’s petroleum goods, for example, by way of the EU on the
way to Britain. If Brexit negotiations result in UK not being part of the
Single Market, prices 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 UK, and those higher costs
are likely to have a ripple-down effect within the logistics industry.
Eventually, it will be consumers through Europe who feel this effect most
acutely, as hauliers and logistics companies will straightforwardly pass on the
increased costs to their customers.