Brexit simply refers to the exit of Britain from the European Union trade bloc. The word is borrowed from Grexit (which is used to refer to the possible exit of Greece from the EU). The recent talk of a pending Brexit has got many panicked over moving countries, loss of jobs, industries collapsing, debt crisis and so much more.
For the first time in 40 years, the British people will, on 23rd of June 2016, hold a referendum to decide whether their membership in EU will be renewed. The Prime Minister declared that Britain will no longer be a super state member of the EU if the referendum results prove their willingness to forge their path away from the union.
Cameron’s Conservative Party promised to let the electorate vote on the country’s EU membership once they worn. Now that they are in office, they have to deliver on their promise. There has been a growing feeling that Britain should withdraw from the EU, roll back the union’s regulations and take back the country’s border controls.
Needless to say, Brexit will grossly impact countless businesses, among them being the logistics industry. EU membership allows free movement within the member states as stipulated in the trade agreements. Let us look at some of the implications of potential Brexit to the logistics services.
The EU is Britain’s largest trading partner. An average of 52% of the country’s products finds good market within the unions members. As such, this partnership ensures that the European market is well supplied and the UK economy and businesses flourish. If the recent traffic at the Channel ports is anything to go by, the sheer volume of imports and exports is astounding.
British exit from the EU will mean that the existing trade agreements with other EU members will be renegotiated. This could mean higher trade tariffs come into play, which could in turn translate to lower movement across borders. Here is the story; when the export levels shrink, the demand for professional logistics services also go down. This last tumble is taken by the logistics industry.
As a current EU member, British citizens enjoy the freedom of moving in and out of member states with minimum restrictions, disruptions and even fast tracking through EU lines at border controls. This allows every citizen to enjoy hassle free travel throughout the continent.
With the possible Brexit, British citizens will no longer have that privilege. This means that they will have to go through the meticulously slow passport control processes, and the same goes for the products. This new process will definitely add to the delivery hours and increase administration work when it comes to navigating the borders that were once wide open. This means that the costs will go up, the delivery speed will increase and the agitated customers may want to pull out. This results in lower business for the logistics industry players.
The possibility of Brexit is very real, and the potential implications on trade are equally worrying. UK exclusion from the luxury of EU free trade agreement may result in increased tariffs which affect imports while reducing competitiveness of the UK product leading to low exports. This reduced trade affects the shipping and logistic companies such as Move-Europe which will have less business.
While all the aforementioned implications can cause major decline in the demand for logistic services, they are without a doubt manageable. A quick reaction to some of these implications can keep the businesses going despite the hardships.
For example, companies can form strategic dual sourcing partnerships to ensure that business continues as usual, even if the sources change. If the tariffs make import to and export from UK hard and expensive, businesses can always explore other markets, which will keep the logistics companies in business.
The UK membership and possible exit is among the top complex issues to tackle this year. With the nation already divided, the risks involved in case of an exit affect quite a number of companies, which in turn affects the demand for logistics services. Additionally, the tariff regime could spell doom for the strength of the pound, making imports even more expensive.
It is not all doom, however, should Brexit happen. While the current challenges may go on for a few months, there are mitigative measures to take. Businesses may only face a rocky few months before they figure out alternative sources of raw products and markets, which means that the logistics industry will spring back on its feet in no time.
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