Thursday, Dec 8, 2022
International Finance
Exclusive Logistics

Brexit heavily disrupts European logistics and trade

Brexit Logistics Europe
Brexit may also lead to transhipment, thus creating new supply routes in Europe

The UK finally left the European Union(EU) on February 1, after years of negotiations. This could have a significant effect on the supply chain and logistics sector across Europe, according to many experts. It will have a negative impact on European trade. Prior to Brexit, goods and supplies moved across Europe without much interruption, resulting in smooth transition which is essential for the functioning of a supply chain. Post-Brexit there will be economic, customs, and administrative changes and also additional charges and duties will be imposed on shipments. This will greatly affect the functioning of the supply chain.

Even though the UK has exited the EU, they have entered a transitional period which started from February 1st 2020 and will last until December 31st 2020. During this period, there will be no changes in trading agreements between the EU and the UK and current rules and regulations continue to apply. However, many firms are already mulling changes with regard to where goods are manufactured, stored and how they are distributed across the region. Some supply chain will avoid the UK to defer the additional charges and duties to be levied post-Brexit. It may also lead to transhipment, thus creating new supply routes in Europe. Some experts believe the UK will also lose its role of being the gateway to the European continent.

The EU is the world’s second-largest trading bloc, and Brexit will result in incremental cost in the supply chain. It will not only impact intra-Europe trade but also hugely affect logistics company in the region. Road haulage is the dominant mode of freight transport within the UK. The majority of goods imported to and exported from the UK by road are handled by overseas hauliers (with vehicles mostly registered in Poland, Ireland and Romania). Conversely, the UK hauliers account for 8 percent of the total haulage activity in the EU, according to a KPMG report. Those UK hauliers could face several hurdles post-Brexit. Also, additional tariffs and customs clearance procedures cause delays in supply chains and increase costs for all modes of transport. The UK logistics companies operating through European ports will also lose the benefits it received while being a member of the EU. Similarly, other European maritime transport companies will have to adhere to new UK rules and regulations while shipping in ports in the country.

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