brexit impact logistics

How Brexit Can Complicate International Logistics

With all of the attention that has rightfully been taken up by COVID-19 throughout 2020, concerns over Brexit have quieted to some extent.

That said, they’re beginning to roar back to the forefront of the news. Now that the process of vaccinating the public against the coronavirus has begun, we’ve quickly grown used to the idea that the pandemic will end.

When it does, however, all of our old problems will resurface — and Brexit will be chief among them. That is not meant as a stance on the broader issues with or merits of the Brexit concept.

What we can largely agree on, though, is that a “no-deal” Brexit could cause unfortunate turmoil.

As was recently reported by NPR, the UK and EU are still negotiating in the hopes of reaching a deal before the “hard” end-of-year deadline they’ve imposed. But by and large, across various reports (and in keeping with the turbulent Brexit process to date), there isn’t a lot of optimism.

We may turn the page towards 2021 without a UK-EU Brexit deal in place. This would cause all manner of problems on both sides. But it might be particularly problematic for the UK’s international logistics operations for several reasons.

How Brexit Can Impact the UK International Logistics Operations

A Red Tape Nightmare

Reuters suggest that British companies will have to “confront a wall of bureaucracy that threatens chaos at the border” — whether there’s a deal or not.

What this looks like exactly is difficult to forecast, particularly given that different companies and industries will be affected in different ways.

As discussed in the article on the Best International Shipping Companies in the UK, numerous international shipping companies conduct massive amounts of business as third parties in the UK logistics operations. Overall, though, this “wall of bureaucracy” will mean a few different things.

There will be new customs paperwork. There will be new IT systems used in the process of allowing entry to Europe. Some professionals still need to be trained in those IT systems and with new protocols in general.

These issues are likely only scratching the surface. And yet, even considering these alone, it’s easy to project massive delays across the spectrum.

Reduced Trade Opportunity

As a result of increased red tape, general complications, and an overall negative sentiment surrounding Brexit negotiations, there could also simply be less trade opportunity.

That is to say, there may well be companies or entire industries that eye current conditions, wait out trade negotiations, and ultimately decide to look elsewhere for business.

It would seem to be a virtual certainty that there will at least be some instances like this. This is also one issue, though, that will likely be worse if the UK and EU fail to reach a trade agreement.

The red tape issues discussed above will be present to some extent regardless of the outcome of negotiations. A Reduced opportunity will be more of an issue specifically if there is no deal.

Forex Issues

The term “forex” is generally used to describe the currency markets in which people buy and sell currency pairs as a means of investment. It’s a broader concept than that, though.

A feature on ‘What is Forex?’ published by FXCM explains, “If you’ve ever travelled overseas, you’ve made a forex transaction.” This comment is meant to convey that any exchange of currencies is effectively a trade. All international transactions have to account for differences in currency values between the two parties.

This is a complicating factor in the world of logistics and is, in fact, already the subject of a lot of tech-related advancement being considered.

For instance, some view blockchain technology as a key cog in the future of logistics because of its potential to make transactions cheaper across borders. Others even believe that cryptocurrency itself could become a new standard for international exchanges, given its universal value.

For now, currency exchange across borders remains a complex issue and one that could be made more so by an unstable Brexit. 

According to a Wall Street Journal piece about Brexit and some of its economic implications, some logistics companies have already been moving British pounds out of their accounts. This appears to be in anticipation of a devalued pound and weakened international exchange rates related to a no-deal Brexit.

The article notes that there are some positive implications of this as well. Notably, a weakened pound will give the UK retailers a much-needed boost, as international businesses will find it affordable to do business with them.

But where logistics industries are concerned specifically, wider gaps in currency values and a more complicated forex picture, in general, will lead to a lot of headaches. Wider currency discrepancies — in addition to new taxes that will inevitably spring up — make for more challenging international dealings.

Debilitated Workforce

It’s also very important to mention that a substantial portion of the UK’s logistics industry depends on workers from abroad. This doesn’t mean that people from other EU countries who are working for logistics companies in the UK will have to stop doing so by any means.

However, with one of the core tenants of Brexit being the tightening of restrictions on migration, the influx of a logistics workforce from the rest of the EU and elsewhere could well slow down. It will be shocking if it doesn’t.

This will translate to a debilitated workforce, possibly to the extent that some companies will have trouble hiring to meet their needs.

Conclusion

None of these is meant to paint an unnecessarily bleak picture. Furthermore, it’s still possible that the UK and EU will reach agreeable deals. For now, though, the Brexit process looks as messy as ever. And it would be wise for those involved in logistics to be aware of some of the potential consequences.

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