As the debates about Brexit reach a crunch point, the tough practical details about how international trade is managed have come to the fore.
The Chartered Institute of Logistics and Transport (CILT), as the leading professional organisation supporting the freight and logistics industries, has been working with government departments running a series of round table discussions with politicians and industry.
At an ideological level, some people think that Brexit is a good idea whilst others think it is bad. The Chartered Institute of Logistics and Transport is less interested in these ideological perspectives than the practical details of moving people and goods. Will lorries be queuing at border crossings, will the supermarket shelves run dry, or will there be enough drivers if immigration policy changes? When CILT gave evidence to the House of Lords European Union Committee on 13 September the message was clear. Having a good plan, and being successful in delivering it, is critical whatever Brexit strategy is followed.
The lack of a plan since the EU referendum has been a huge problem for everyone. CILT has stressed the need for everyone to prepare for situations where border controls are introduced. There are large lorry parks on the European borders with Switzerland to manage border inspections, but constructing similar facilities at all UK ports will take many years.
The impact of Brexit on freight is dependent on the conditions relating to border management processes and employment. To speed up movement with frictionless borders, CILT has been emphasising the need for more UK companies to gain authorised economic operator (AEO) accreditation. Germany has 5,000 AEO operators to ensure it can continue to trade efficiently with countries outside the EU. In contrast only 600 UK companies are AEO-accredited, making the UK relatively poorly prepared for change.
CILT emphasised at the House of Lords that the UK is simply not ready for Brexit. British industry has not grasped that frictionless trade depends on implementing solutions that drive forward the digitisation agenda of their business. Regardless of the Brexit outcome, investing in these new systems would improve productivity and mitigate the risks from any global trade changes. Smart automation allows companies to accelerate the various customs processes and save valuable resources.
Scotland’s heavy dependence on exports of food and drink requires particular attention. Between 30-50 per cent of goods movements through Dover are food. Inevitable delays in the event of border controls pose a very significant threat. Operators from Scotland will need to become more dependent on ports such as Felixstowe and Hull but all routes will have increased delays and higher costs.
Perhaps the most challenging issues relate to trade from Ireland. Most goods from the rest of Europe to and from Ireland pass through the UK, yet no acceptable solution has been identified for managing these movements or for controlling the flow of goods from outside the EU via the UK into Ireland.
Another key problem has been the very large number of non-UK registered trucks operating in the UK. Nearly 40 per cent of the goods moved within the UK are either imported or exported and 16,000 to 20,000 foreign trucks operate within the UK at any one time. The UK depends on these for internal movement of goods and it will take time to mobilise vehicles and labour to replace these operators in the event of new restrictions.
Flexible IT systems can greatly reduce these problems. All Scottish businesses, and organisations like the NHS dependent on imports of medicines, should be checking now that their customs brokers, freight forwarders, or logistics providers are able to respond to more flexible global trade systems.
Whilst this sounds like a bureaucratic nightmare, it is also an opportunity to save time and money regardless of the Brexit outcome, building the foundation from which to manage many future global trade changes. Once all partners are fully integrated into a company’s end-to-end supply chain processes, they can deliver added value, efficiency, and regulatory compliance, ultimately accelerating and securing the value chains. About 60 per cent of freight tonnes moved is internal to the UK, accounting for about 400,000 HGVs and another one million vans. These movements could also be affected by staff shortages as they rely on workers from across the EU. Increased automation in warehouses could reduce these pressures, but this requires Government to promote such investment as part of their Brexit programmes.
Under the most challenging scenario of a hard Brexit, CILT has told the government that the increases in stock and warehouse requirements and reduction in the reliance on foreign vehicles will require capacity that will not be easily deliverable in the short term. Operators will not be able to respond efficiently which will have substantial effects in driving up prices for consumers and industry with potentially serious consequences for the economy.
Even with the hardest Brexit outcomes, UK standards must remain strongly aligned with EU regulations on vehicle and equipment standards to facilitate the inter-operability which will be essential for future trade.
Overall, in a fast changing and uncertain world, successful investment in technology and automation within the supply chain will help the country to compete, regardless of the Brexit outcome.
These changes will take time to implement so the time to invest is now.
Derek Halden, CILT Scotland.