As we approach the new October 31st 2019 deadline for UK's departure from the EU, and with newly elected British Prime Minister Boris Johnson’s preparedness for a “no deal Brexit”, it is imperative to fully understand the impact Brexit could have on UK business and their trading with EU
For many in this space, uncertainties regarding the specifics of the approaching changes is a considerable source of stress. What may serve to mitigate this is the appreciation that Brexit is not expected to have any significant effect on the UK’s relationship with non-EU countries in the shipping sector, a group that comprises more than half of all UK trade volume.
That said, the impact of Brexit on shipping to and from the EU is ripe with speculation. Amongst which appears to be two general themes for the impact that have arisen: increased delivery lead times and increased costs.
Increased Delivery Lead Times
As a member of the EU, UK firms enjoy short delivery lead times. Departing the Union, even if a free trade agreement is achieved, will bring an abrupt end to the ‘border-less’ international shipping experience enjoyed by all EU members.
Large volumes of UK shipping from the EU is carried out using roll-on roll-off vessels, which carry trucks loaded with goods that can drive straight off the ship and continue by road. In many Brexit scenarios, these trucks will require document checks or even physical inspections. Inspection delays may further increase if any discrepancies are found in customs documentation, and are expected to slow the entire shipping process, in some cases eliminating the time-saving benefits expected from the roll-on roll-off transport method.
Border control times will have a large impact. According to a London School of Economics article, checks on vehicles carrying exports to EU countries currently take an average of 2 minutes at the UK port of Dover, compared to a 20-minute average for goods traded with non-EU countries.
While Brexit isn't expected to increase the 2-minute wait significantly, it is predicted to add at least an extra 2 minutes to this time. The cumulative impact of this increased time per truck could potentially lead to five-hour long queues on reads leading in and out of the port, and delays of this length could have disruptive potential.
Increased Costs
According to Norton Rose Fulbright, it is likely that Brexit will eliminate British admittance to a single European market, access to Tax and Duty-Free trade across European borders, and rights to maritime cabotage services across the EU.
Regarding taxes and duties, the most obvious impact will be on VAT. Exports of goods and services outside the EU are typically VAT free. This exclusion, however, stops when it comes to importing goods from outside the EU. Post-Brexit, the UK becomes a non-EU nation. This suggests that EU firms importing from the UK will begin paying VAT on these goods, and potentially influencing a change in favor of trading with other EU-based counterparts for cost savings.
UK company’s access to EU maritime cabotage rights; tthe rights to water-based transport services within a territory, may also come to an end post Brexit. While this will not innately prohibit shipping and trade from the UK to the EU, it could have an impact on the shipping companies that operate in these areas.
While the exact implications that this will have are uncertain, it seems reasonable to predict that shipping prices between the UK and EU are likely to increase. Furthermore, UK shipping firms are unlikely to avoid EU specific shipping regulations, such as CO2 emissions testing, by leaving the union as these regulations still apply to any companies using EU ports.
Conclusion
To conclude, it appears likely that UK firms will experience longer delivery lead times and costs when trading with EU counterparts.
Customs requirements and subsequent border delays are poised to add delays to all shipments between the EU and UK.
With the promise of a deal or no-deal Brexit, it is important for soon to be affected firms to take the time to understand and address the implications of the changes that seem likely to arrive in the coming months.
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