It is undoubtedly challenging times in the cargo and freight markets at the moment. COVID-19 has sent prices soaring and led to delays in many areas. Things are even worse in the UK and Europe, with Brexit adding to the problems.
Political and logistical problems following the departure of the UK from Europe will take time to solve, and may affect the industry long after the pandemic settles. The UK especially will likely lose out in the long term, no matter what further solutions emerge.
Administration and customs delays
Leading the issues are increased administration hurdles. Now that the UK has left the EU, there is a customs border between the two. Goods that could move freely before are now subject to customs control and clearance. This brings with it significant paperwork and administrative requirements, especially for goods that need to move between several countries.
This can add delays, and of course, additional cost. Many businesses have experienced unexpected and lengthy delays, making planning shipments difficult. VAT may also need to be calculated and paid.
As we approach the end of 2021, customs declarations are likely to become more of an issue. At the end of the Brexit transition period, UK customs allowed declarations to be delayed by up to 175 days (for Customs Freight Simplified Procedures (CFSP) authorized companies). This has since been extended to the end of 2021, with much work still outstanding.
The customs procedures, and possible delays, should improve as more agreements are reached and companies and operators become more used to the process. This increased complexity is likely to lead more companies to use a customs intermediary or a logistics company such as a freight forwarder to assist with transportation needs.
Labor issues and port congestion
Brexit has not just had an administrative burden. It has affected the mobility of people. UK citizens no longer have the automatic right to work in the EU, and vice versa. This is disrupting several industries, especially service industries in the UK that rely heavily on European workers.
Ports and travel hubs, logistics company and transport operators are all suffering from problems related to this. This is only increasing complexity, costs, and possible delays. Again, this could improve as visa policies change, but there will likely be lasting differences.
Just considering air freight, many airports across Europe and the US are reporting congestion and cargo backlog in 2021, with many cargo airlines needing support services. As freight volumes have increased, the onward transportation and distribution networks are suffering severely from staffing shortages. Part of this is related to the pandemic, and a trend for workers to leave the industry. In the UK though, Brexit has had a major impact.
Changes to airline ownership and operation
Longer-term, new roles on aircraft operators will have a lasting effect. Brexit has brought many changes to aircraft operations between the UK and Europe. These are more impactful on passenger operations but will still impact cargo operators.
Airlines are no longer able to operate “fifth freedom” flights. This means that UK-based airlines cannot operate flights between European cities, and European ones cannot fly domestically in the UK. This does not affect cargo flights, but it will affect the industry with cargo based on passenger flight operation.
There are also high-level ownership restrictions that will affect operators going forward. Airlines from the UK and Europe must be owned and effectively controlled by UK or European nationals, respectively. They must also be based and licensed in their own territory.
Changing the UK role as a freight hub
The full effects of Brexit will take time to settle. But it is likely that the UK will lose out. Its role as a hub for imported and exported goods within Europe, both by land and air, will undoubtedly change. With the increased challenges, goods are more likely to be shipped directly to/from other European locations.
In August 2021, Euronews reported how this shift away from the UK was well underway. Speaking to them, Jeffrey Ingarfield, director of UK-based Glenn Freight Services, explained:
“We, as Thatcher said, were the gateway to Europe, to get investment from Japan here: Honda, Nissan, whatever. There’s now no point. Unless it’s going to terminate in the UK, what’s the point in bringing it here? If it’s going to go into Europe, go to Paris or wherever it may be. And we are seeing that stuff that used to come here is just not coming here anymore.”
When will the situation return to normal?
The high prices, delays, and uncertainty in shipping and air freight are caused by many factors currently. It is hard to separate the impact of Brexit from the widespread disruptions caused by COVID-19.
As the pandemic settles, or at least as the industry responds to new ways of operating, the problems left by Brexit are likely to become more apparent. Other factors, including grace periods and stockpiling in some industries, will end too.
Labor issues in the UK in particular, and customs and administrative issues in both regions will take time to solve. In some ways, it is quite a falling of governments that it has come to this. While some look to governments to sort the Brexit issues, improvements now are more likely to come from industry. Operating methods, and prices, will change as companies look for ways to solve the problems. Government lobbying will hopefully see longer-term results too.
Whenever and however the situation settle, the UK will lose out. Cargo rates are likely to remain higher, and the industry will see lower volumes overall.
Data from late 2021 shows this already happening. Figures from the UK Department for Transport (DfT) for the first quarter of 2021 show inward freight down 17% compared to a year earlier.
Brexit has caused problems across many industries. The worst outcome of a “no-deal” Brexit was avoided, but the impact was still felt hard in many areas – including logistics and cargo.
With the impact of the COVID-19 pandemic on cargo globally, it can be hard to see how Brexit contributes to overall prices, but the problems are clear. Higher prices, more paperwork and administration, and congestion at ports are likely to remain an issue for some time. As we have seen in other crises before, the industry will adapt and find solutions, but the UK market, in particular, will look very different from before.
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This article does not necessarily reflect the opinions of the editors or the management of EconoTimes