ANKARA / BERLIN
Although the UK managed to reach a post-Brexit trade deal with the EU before the deadline, the rules of the new era have caused problems for the logistics industry, leading business groups to face delivery delays.
After an 11-month transition period, Brexit finally came to an end on New Year’s Eve, with freedom of movement between the UK and the EU member states also ended as the clock stroke midnight in Brussels.
In theory the trade deal between the bloc and Britain is set to continue without interruption, but in practice things work a bit differently.
Under the new rules, UK firms doing business with the EU face a lot of new bureaucracy, new paperwork, and checks.
Customs declarations, rules of origin checks, product safety certificates, and food inspections are all part of new trading regime.
All of these formalities, along with the ongoing pandemic, have already caused considerable disruptions in trade across the English Channel.
As the Cabinet Office minister, Michael Gove once said, there will be “bumpy moments” until Britain gets used to its new relationship with the EU.
“We know that there will be some disruption as we adjust to new ways of doing business with the EU, so it is vital that we all take the necessary action now,” he said on Dec. 28.
“In 2016 when we learned about the Brexit decision, we were really shocked because leaving the EU means leaving the common market,” said, Hans-Peter Zint, chairman of the German-based Cuxhaven Port Association.
Since the decision was clear, the logistics industry has known there would be some degree of changes and disruptions and maybe also some additional costs.
In the four years since the Brexit referendum, he added, the industry made all the preparations it could to safeguard economic activities.
Pointing to how the EU logistics chain also deals with countries like Iceland and Norway, both of whom also fall outside the common market, Zint said that they know how to deal with customers from outside the bloc.
“But that made up 5% of our cargo traffic. Now we’re looking at almost 85-90% of our traffic,” he explained.
After first understanding the scope of the task, he said, the second item on their to-do list was “to implement computerized software to have an electronic data interchange with customs and also with our clients, [and] of course with shipping lines and exporters.”
They also invested in additional space, just in case of delays so they would be able to accommodate extra cargo on hand.
Zint also said that there could be a problem with some trucks getting stuck at the border.
“If we do not have the correct documentation, then maybe there will be long queues,” he warned.
Other trucks may not be able to bypass trucks lacking the proper papers, “at least some of them, so there could be a big backlog,” he said.
He stressed how some logistics companies have limited space at ports and lack the capacity to keep a lot of cargo on hand, which could lead problems and delays.
“So the question is, with all those customs formalities now needed, how can you keep the schedule as promised in contracts?”
Rise in shipping costs
Every importer in the UK and every exporter to the UK fears a steep rise in costs in the post-Brexit regime, said Zint.
“Because of that, they tried to move as much cargo as possible before the first of January,” he said, leading to a spike in volume of “probably around 30%-40% above the normal average.”
He said due to the pandemic’s economic fallout, especially on the demand side, many containers became blocked and stuck in port, with large containers coming through from China, as it seeks to shake off the virus’ impact.
“That’s how I would interpret the situation, it’s the combination of COVID and Brexit,” he explained.
Despite Turkey and Britain reaching a free trade deal late last year, Zint also warned Turkish logistics companies of the situation developing in the UK:
“If there’s a Turkish logistics company which has traffic from continental Europe to UK, if its cargo traffic is via the channel ports, I would advise them to take a good look at the situation which is developing there.”
He said the Turkish firms should consider alternative options, for example finding a partner company which then does the delivery on the UK side.
“I think this would probably bring a lot of more a lot more stability to the logistics chain,” he said.
The UK government has faced many problems trying to ease the process by placing mitigating measures.
For example, the government is delaying full controls on goods entering the UK from the EU for a further six months.
As traders continue to face a host of problems resulting from Brexit, It seems debate over the new trading regime is unlikely to end soon.