UK/EU trade volumes are down, but some serious issues have materialised. Brussels, we have a problem.
11 pm on the 31st December came and went, and the post-Brexit transition period ‘new dawn’ arrived. The ‘reasonable worst-case scenario’ of long delays on cross-channel freight services, with trucks held up for days on end due to new customs procedures and border controls, has failed to occur so far, even if quite a few traders and hauliers have indeed experienced some problems.
From what I can see, there are two main reasons for this, Firstly, the overall number of trucks crossing the channel in the first couple of weeks of 2021 represents a fraction of what would normally be expected at this time of year. Dover ro-ro traffic in January so far is reportedly 60% down compared with 2019. This is an inevitable consequence of the huge increases which took place in November and December – Eurotunnel’s ‘Le Shuttle’ throughput figures, for example, for those two months were up 11% and 8% respectively on the same months in 2019. Businesses in the UK and the EU adopted a risk-averse strategy and engaged in an unprecedented level of stockpiling and advanced ordering ahead of the transition period deadline.
This current trend might therefore be considered as temporary, and traffic volumes will increase steadily over the next few weeks. However, there’s a more deep-rooted cause for the reductions in volumes, which also involves the ‘congestion’ taking place not at the border as such, but further back in companies UK/EU supply chains, which is preventing goods being exported or imported to and from the EU in the first place.
The UK government’s business engagement, advertising and communications programme relating to Brexit has steadily evolved since 2016, and the most recent reincarnation carried the tag line ‘Check, Change, Go’. The end of the transition period is approaching, we’re going to be out of the Single Market and Customs Union, you need to urgently check how this is going to affect your business, make whatever changes to your processes, procedures and documentation are necessary, and get ready for the brave new world in 2021 which you’ll be able to approach with confidence. Or words to that effect, anyway. This was certainly backed up by a plethora of detailed information made available to all businesses by email links to the relevant sections in the gov.uk Brexit web pages.
To exporters and importers: you’ll need to get set up to do your own customs clearances, but they can be quite complicated things, so you should probably consider using a customs agent instead, was the message. A list of customs agents has even been provided on the gov.uk website. Plenty of guidance and updates too on all matters relating to the export and import of products of animal and plant origin, and the whole documentary and certification requirements pertaining to Sanitary & Phytosanitary procedures and controls.
The various easements introduced by the UK government have helped of course: the option for importers to delay the full customs declaration for an initial six months, the possibility to convert import VAT to postponed accounting, and the three month waiver period for full SPS documents and procedures for UK imports, for example.
There are no such easements for UK exporters to enjoy however, and as a result – especially, but not only, in the food sector – there has been a stark realisation that the changes which have occurred are game-changing as far as EU supply chains are concerned. The new trading landscape is incompatible with the just-in-time, multiple product consolidation, door to door and B2C supply chains which have been enjoyed for so many years within the barrier-free, domestic Single Market. Ultimately, after the waivers and easements have gone, the same applies for UK imports from the EU too.
Getting ready for Brexit – Check, Change, Go – was never entirely about businesses putting in place new documentation and processes, applying for new licences and organising customs clearance. It was all that plus, in so many cases, completely redesigning UK/EU supply chains in order to cope with the requirements of customers and end-users. New strategies for the location of stock, preserving the fulfilment of orders and deliveries as closely in line with the existing situation as possible in order to maintain customer satisfaction – perhaps even taking an opportunity to improve lead times in some instances. Evaluating the trade-off between possible additional inventory costs and sales continuity. And a lot more besides.
Of course, many UK and EU companies have already made their assessments and instigated whichever Brexit-induced supply chain changes are appropriate for them. But many will not have done so, certainly not comprehensively, as yet. Perhaps for some businesses in particular market sectors, the dramatic impacts which Brexit would inevitably bring to their business model were just too damaging to contemplate. So they didn’t contemplate them. And perhaps, in some cases, their decision-making was influenced by a fairly widespread and misleading theme in the popular media that a ‘deal’, if achieved, would mean that UK/EU supply chains would remain seamless and frictionless. That particular die was cast very differently, in fact, quite some time ago. From January 2020, following the Withdrawal Agreement and the clear commitment from the UK government to leave the Single Market and the Customs Union, there was only ever going to be one outcome.
What can be done? The food industry in particular is clamouring for some respite. Seafood Scotland, for example, is understandably calling for a retrospective implementation by the UK and the EU of an SPS waiver period of at least six months, as many of their exporter members’ business models and supply chains can’t withstand the new requirements. Time is desperately needed to adjust and to make decisions about precise business and supply chain models for the future. It’s not an unreasonable request – after all, food standards and specifications have not changed overnight, and, under the circumstances, you would have thought that a time-limited ‘equivalence’ period could have been negotiated without any damage to the integrity of the EU’s Single Market. But there’s no sign at the moment of that happening, and in the meantime many UK exporters of food, perishables and other sensitive products are suffering badly. It seems that some pragmatism is urgently required.
And, of course, it’s not just the short-sea straits route between the UK and the Continent which is in scope: the Irish Sea crossing plays an extremely important role in UK/EU trade as well. Especially with regard to the food sector.
Brexit was never going to be an easy event to navigate for industries, companies and individuals involved in trade and supply chains between the UK and the EU. The next few weeks and months will reveal the true extent of the challenges ahead.