Logistics businesses struggling to fund Brexit preparations

With profit margins averaging only 2% in 2018, significant financial investment, especially when the international trading landscape post-Brexit is still to be determined, is very difficult to justify, FTA observes.

Declining profit margins have left many logistics businesses struggling to fund their Brexit preparations, according to the 2019 Logistics Report. 

Launched by the Freight Transport Association (FTA) in association with Santander Corporate and Commercial Banking, the report polled the opinions of more than 500 freight and logistics businesses operating in the UK and internationally, to provide industry insight into the latest political and economic developments.

Elizabeth de Jong, FTA’s director of UK policy, commented: “Declining profit margins have left logistics businesses struggling to fund their Brexit preparations. Profit margins were only 2% in 2018, making any significant financial investment very difficult to justify for any business, especially when the international trading landscape post-Brexit is still to be determined – logistics companies simply do not know what they should be planning for.

“It is of no surprise, then, that at the time of the survey, 37% of respondents had not taken any action to prepare for Brexit and only 17% had created a plan for a No Deal Brexit.”

These figures appeared little better at an informal poll at the ‘Brexit lessons and opportunities’ discussion panel last week at Multimodal 2019, in which 65% of delegates at the start of the discussion said they felt “mildly prepared for Brexit”, although that figure had fallen to 56% by the end of the discussion.

The 2019 Logistics Report survey indicated that the uncertainties surrounding Brexit are taking their toll on the logistics industry, with 61% of respondents saying this uncertainty is a barrier to the growth of their businesses internationally.

Ms de Jong continued: “Logistics businesses are also concerned about how the UK’s departure from the EU will impact their workforce; 80% of respondents say the employment status of EU workers is their most pressing Brexit challenge. 13% of HGV drivers currently working in the UK are EU nationals; the continued residency of these workers is not guaranteed post-Brexit.

“FTA is campaigning for amendments to the Future Immigration White Paper, so non-UK logistics workers are welcomed in the UK, to help address the worsening skills shortage.”

The report also found that the UK’s global competitiveness has dropped significantly and investment in the UK’s transport and logistics infrastructure is urgently required to boost its attractiveness to international investors.

As reported in Lloyd’s Loading List, freight representatives at Multimodal 2019 said the UK government must provide the logistics industry with clear and stable information so that it can invest in the right technological solutions to prepare for Brexit – and far more time to prepare for a no-deal exit, if no withdrawal agreement can be reached.

The technology potentially exists, at least on the Customs side, and could be put in place over time to ensure a relatively seamless supply chain in a ‘no-deal’ situation, the panel of experts at the event said; but companies cannot invest without knowing what the right system needs to be. And even once an appropriate system has been identified, importers and exporters need time to prepare their processes.

Given the large extra volumes of clearances that will be required after the UK leaves the EU, unless the UK and EU regimes are fully aligned, this means the systems will need to automated, meaning import and export companies will need years, not months, to prepare their systems and processes internally, logistics experts told the packed audience listening to the ‘Brexit lessons and opportunities’ discussion panel.

“The technology is there as a tool, but this is a cart and horse situation,” said Tim Reardon, head of EU Exit at the Port of Dover. “Until we have defined what the process is that the technology needs to deliver, there isn’t much point in developing it.”

Eurotunnel’s Public Affairs Director John Keefe said that with so many players involved in the supply chain, there was an urgent need for government to refocus and give a clear and stable definition of what the Customs process would be.

“All the energy is going into managing the negative consequences of ‘day-one no-deal’; very little energy is being put into avoiding those negative consequences,” he said.

FTA’s head of global and European policy, Pauline Bastidon said there was an urgent need for clarity. “FTA continues to advise its members to use the time they have to prepare for a ‘no deal’ outcome, but many companies are reluctant to invest heavily without certainty that these investments will be required,’ she said.

“This is probably the biggest challenge we have faced in a generation and the implications for logistics are huge. Government can do a lot to support the logistics industry as companies prepare themselves. FTA is urging the government to extend the easements granted pre-29th March, provide clear, end-to-end guidance to industry setting out the process and requirements on both sides of the borders and to work with the industry to increase the attractiveness of transit and Customs facilitations.”

Source: Lloyd’s