A no-deal Brexit taking place seven weeks before Christmas and four weeks before Black Friday will be a nightmare for retailers and consumer goods firms, according to a report on Britain’s withdrawal from the European Union by a UK business trade group.
The Confederation of British Industry (CBI) said the Brexit date of Oct. 31 comes at a time of year when available warehousing is at its lowest level and demand at its highest, with the United Kingdom Warehousing Association saying the sector is already full.
In a report titled “What Comes Next,” CBI sought the opinions of more than 50 trade associations across the UK economy to assess the readiness for Britain leaving the EU without having a withdrawal deal in place. Their conclusion was that neither the UK nor the EU was ready for a no-deal scenario.
In the run up to the original March 29 Brexit date, UK manufacturers and retailers began to build inventory, anticipating bottlenecks at key border crossings. Preparations cost business billions of pounds, the CBI report said, noting that stockpiling in the run up to March was so significant that it drove never-before-seen distortions in IHS Markit PMI data when manufacturing output growth and new factory orders accelerated to an eight-month high.
Delay no more
However, pushing the European exit date back to Oct. 31 has not done business any favors. CBI found manufacturers have been running down the stock they gathered for April in the belief that the risk of no deal has decreased, or because they need to use items such as printer cartridges or medicines before their use-by dates. Having six months’ warning to bring forward orders was, in some cases, impossible, CBI said.
CBI said overall, many goods firms would be even less prepared for no deal in October than they were in March. It warned that a number of sectors would lose a key aspect of their competitiveness in a no-deal scenario, including agri-food businesses priced out of their most important market, and professional and business services firms no longer able to freely operate across the European border.
“Many UK trading firms will see their exporting functions tied up in red tape, having to comply with multiple sets of regulations to function for the foreseeable future,” the report found. “Business preparations for the long-term in no deal have hardly begun, but when they do it will inevitably be to the detriment of the UK economy.”
But a crucial sticking point remains customs. After 40 years of frictionless trade between the UK and Europe, the lack of a deal will guarantee significant trade disruption as almost all measures that facilitate the trade and transportation of goods the UK currently has with the EU will fall away, leaving businesses to face customs procedures, declarations, and likely delays at the border.
An Organization for Economic Cooperation and Development (OECD) study found that documentation and customs compliance requirements, lengthy administrative procedures, and other delays could increase the transaction costs of goods transported by between 2 to 24 percent of the value of the good.
Robert Keen, director general of the British International Freight Association (BIFA), said its members could not prepare for a no-deal Brexit given the ongoing uncertainty over many issues that affect how they conduct their trade with the EU.
“In the last few days, we have seen a completely new government installed, which is intent on the UK leaving the EU with or without a deal,” Keen said in a statement. New British Prime Minister Boris Johnson has said he has no problem with the UK leaving with no deal.
“With less than 100 days to the Brexit deadline, departments in that new government must urgently step up their preparations, engage with and listen to trade associations such as BIFA, and deliver clear advice on how trade will be conducted after Oct. 31, deal or no deal,” Keen said. “Talk is all well and good; but what we now need is clear information and instructions.”
Shippers are already taking measures to avoid bottlenecks expected on key trade corridors such as Calais-Dover, which handles 75 percent of all roll-on, roll-off (ro-ro) freight arriving by ferry from Europe every year, or more than 4 million accompanied trucking units. An estimated 14,000 trucks cross the UK-EU border every day, with the port of Dover handling 17 percent of the UK’s total trade in goods.
To avoid congestion on this corridor, shippers are shifting from the road to the ocean, according to Samskip. The European intermodal operator said UK importers and exporters were already moving from trailers to containerization, a trend that mirrors shipper behavior in the build up to March 29.
Samskip interim CEO Diederick Blom said the intermodal carrier had refined its post-Brexit preparations after March.
“In the run up to the original Brexit date, container transport proved reliable and efficient, and that it could handle far more freight without the risk of terminal gate tailbacks, customs red tape, driver shortages, or industrial action,” he said.