Ken Thomson: Logistics firms need clarity on life after Brexit

With negotiations aimed at reaching agreement on the terms for the UK to terminate its membership of the European Union under way, companies across all sectors of the Scottish economy are trying to understand better what the implications will be for their businesses '“ and what challenges they may face in 2019.

Chair of CILT in Scotland Ken Thomson

Scotland’s economy depends on having access to efficient supply chains – whether they are supplying manufacturers with the components and materials they require, or supporting the seafood industry which wants to assure international customers that the shellfish they have ordered will be delivered on time, and in prime condition.

Every year almost 4.5 million journeys are completed by transport companies between the UK and Europe – with vehicles carrying products of all types, and supplying the UK with almost 30 per cent of its food. At present a truck can make a delivery from Edinburgh to Brussels as easily as it can from Edinburgh to Birmingham as far as customs processes are concerned. Whatever new arrangements are finally put in place when the UK leaves the EU, that will not be the situation in the future. The EU must protect its external borders so some new procedures will be needed to control the movement of goods.

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That is why logistics companies – and the businesses across Scotland which rely on their services day, in day out – recognise the importance of having systems which allow consignments to be transported on schedule, without ports becoming swamped by congestion, and without fresh food supplies being lost if they are kept waiting while new processes are carried out. Given the volume of goods transported every day, this is a major challenge.

The arrangements which will be negotiated are therefore a key area of concern for industry bodies, including the Chartered Institute of Logistics and Transport (UK), which has been engaging with the UK Department for Transport (DfT), recognising the need to achieve the best possible outcome from the negotiations.

So what are some of the fundamental issues which will be of most concern for the Scottish economy?

First and foremost, the overriding objective must be to ensure borders operate as efficiently as they do at present – or even more efficiently, under the new regime.

If borders do not operate efficiently the knock-on effects are considerable – with congestion building at ports, frustration developing as service quality deteriorates and transport companies being forced to deploy more vehicles and drivers to maintain services, with an ultimate cost penalty for the consumer.

The administration of any new system (including the processing of any payments) will need to make much greater use of technology to track goods than is currently the case, and it should not take place at ports or airports, where the risk of exacerbating delays and congestion is too great.

Secondly, any restrictions on the availability of labour from the EU should be avoided. The maintenance of domestic supply chains within the UK as they currently operate simply could not continue without staff from other EU countries, and there is a need to consider the future needs of industry, as well as those of sectors which rely on seasonal and transient workers.

Thirdly, the introduction of new regulations should not impose any additional burdens on industry. Regulations which control matters such as vehicle design and operation should be harmonised with existing EU controls, to ensure there are no barriers to the movement of trucks and drivers between the UK and the EU. (At the same time there will be opportunities to revise, and simplify, legislation within the UK which has been based on EU standards).

So what is the way ahead? Today’s supply chains are designed to be flexible and responsive – to react to seasonal fluctuations in demand, and to cope with peaks such as Christmas. However, they involve the use of expensive resources, and as most companies operate through annual budgets, they need sufficient time to plan their operations accordingly.

Logistics and transport companies cannot be expected to cope with a new regime from March 2019 (as the UK leaves the EU) without adequate time to prepare, so it is essential contingency planning with businesses on their supply chains starts as soon as possible, and this will probably include a lengthy transition period during which the inevitable challenges that arise will be ironed out.

That principle applies throughout the logistics and transport industry generally, and many companies are now making plans to ensure they can operate in both the UK and Europe. EasyJet are making contingency plans to establish a European operating base, as are many Scottish companies. However, greater certainty is needed soon, which is why Ryanair are making it clear that they cannot wait until 2019 to make decisions on how their aircraft will be utilised and what routes they will serve.

The outcomes of the UK/EU negotiations could have significant impacts, and the need to keep the Scottish economy moving is vital. It is clear the UK has voted to leave the EU, but what is still much less clear is what the UK has voted for as an alternative to EU membership. Without greater clarity soon the ability of the logistics and transport sector to continue to deliver resilient supplies of goods and services to Scotland is threatened.

Chair of CILT in Scotland Ken Thomson