OilFieldTechnology.com recently reported the opinions of an energy logistics expert on the possible logistics management implications of the Brexit deal about to be voted on in the House of Commons next week.
Talking about the oil and gas industry in particular, he commented that those businesses with the EU trading partners will be viewing particular elements of the draft UK withdrawal agreement favourably.
Adam Johnson, director of Tudor International Freight, a Leeds based company, welcomed the full approval of the UK Brexit document given by EU leaders. Their positive response helps bring an element of confidence about future trading arrangements with this bloc, so long as Parliament votes the existing document through too.
Johnson said that EU ratification confirms that goods will continue to be shipped between the UK and E.U., without the burden of new tariffs impositions or any need for time-consuming border checks. Documentation may change, but brokerages and third party logistics providers can harness the power of automation to up-date any necessary changes in freight systems, once adjustments are made to management software templates and working practices.
Johnson explained: “The current largely economical, quick and simple shipping of goods between the UK and EU takes place mainly because we’re members of the bloc’s Customs Union. If the draft withdrawal agreement takes effect, we’ll enter a 20 month transition period after leaving on 29 March next year, during which our relationship with the EU will essentially remain unchanged.”Assuming the withdrawal agreement is passed in Parliament on Tuesday’s vote, freight forwarding companies and brokerages therefore have a period of adjustment in which systems can be reviewed and made ready for changes ahead.
In the event of no long term free trade agreement going through, which is possible, there is it seems provision for extending a transition period also. Johnson explains it thus: “Moreover, the draft says if a long-term free trade agreement isn’t concluded between the UK and EU by July 2020, the parties can agree to extend this transition period indefinitely and that, in the absence of such an accord, the ‘backstop’ will take effect. This measure – designed to guarantee a continued open border in Ireland – would mean the UK and EU remaining in a single customs territory ‘unless and until…a subsequent agreement becomes applicable.’”
Another reason for the oil and gas sector being satisfied at this point with E.U. ratification is the opportunity for the free movement of labour provided for in the draft agreement. This is beneficial to freight forwarding companies and European traders. “Many of our customers depend on foreign workers to facilitate their international trade and numerous freight forwarders similarly rely on employees from abroad to drive lorries and run warehouses, for example.”
Freight systems, it seems then will remain as they are under Theresa May’s ‘best available deal’, at least until the end of a transition period, at which point companies may have made other arrangements.
In terms of the UK crashing out of the E.U., without agreement from the Houses of Parliament, the government is making preparations to minimise disruption at the ports. It would be unrealistic, however, to expect no disruption to logistics management, as Johnson acknowledges.
“It’s no secret the UK government has done little preparation for such an outcome and all the facilities, staff and often-complex processes needed to handle such an eventuality will simply not be in place by next March. The recently highlighted dangers of 20-mile queues of lorries trying to reach Dover and shortages of imported foods and medicines, for example, after such a Brexit, are therefore very real.”
Experienced in overseas trade, he believes more than four months are needed to address problems if no-deal E.U. departure happens. For instance, there will be additional administration burdens, such as the UK currently only being equipped to issue around 5% of permits for UK vehicles heading for the EU. In terms of air freight, currently our membership agreement allows for flights to and from the E.U.; these arrangements cease in a no-deal scenario.
As Johnson says, government ratification is still “…far from a formality.” Supply chains are likely to expect some disruption, some of which can not yet be anticipated, or if some companies are asking the questions at a local level, the message is not carrying through to parliamentarians.
This makes it even more imperative for freight management companies to look to their existing systems to find efficiencies, as exports and imports could realistically be hit, not only by backlogs in delivery either way, but extra documentary and regulatory obligations are likely to provide a headache for a variety of businesses.
Freight forwarding software is already proving its value in helping businesses achieve cost savings. In a highly competitive market, where constraints on supply become tighter, the irony is that even as some companies are tightening their belt in readiness, they are also potentially hampering their capacity to avoid some of the unnecessary burdens of administration by not investing in updating their digital freight management software and hardware. Many freight forwarding experts claim the automations and efficiencies new market tools provide can give the edge needed to move through what could yet turn out to be either coming log jams, or conversely greater volumes of trade.