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The Impact of Brexit on Material Handling

In Distribution & Operations by ThomasLeave a Comment

Brexit has been on everyone’s minds for the past two years and there’s still a high level of uncertainty when it comes to possible consequences. We haven’t left yet, so it isn’t all set in stone but what will Brexit do for the material handling industry?

Goods Import and Export Logistics after Brexit

The material handling industry currently accounts for some of the biggest imports and exports in the UK. Machinery and vehicles made up the top two goods exports in the first half of 2017, with a combined value of around £55 billion. European countries account for about half of all goods trade we do internationally, the majority of this being with EU states. However, what’s important is whether it will be more expensive to trade goods with the EU post-Brexit. Unfortunately, the answer is almost certainly yes.

The UK currently benefits from the free movement of goods within the EU. This means imports from other EU member states have no import duties, taxes or customs clearance. Following Brexit, the UK will have to custom clear its EU imports as well as pay taxes and import duties on them. It is very likely that there will be some sort of an agreement in place with the EU. Alternatively, the UK could become a member of the European Economic Area and/or the European Free Trade Association along with Norway, Switzerland, Iceland and Liechtenstein. It’s possible however that some goods will require an import license to import after Brexit. You might also need something called a commercial invoice which determines the import duty you’ll have to pay.

How about exports? These will essentially follow a similar trend as imports do, since our exports to the EU also benefit from the free trade agreement. The commercial invoice mentioned earlier will again be required as an extra step when exporting goods. The duties you pay for your export will depend on the information on the invoice. You will also need the commodity codes for your exports.

So, what does this mean for UK-based businesses? Small businesses that rely on EU imports or exports for their line of work may struggle to absorb the extra expenses. However, UK businesses which compete with the EU for national trade may receive a boost. This is because UK companies will look to buy products made here to avoid paying the increased import fees themselves. Some companies may also create offers to sell to other UK businesses rather than internationally, where possible. The amount which import and export fees are expected to increase by, however, is not yet fully determined.

To put this in short, it is likely that when importing or exporting goods between the UK and EU countries, businesses are going to need some extra documentation, and you’ll have to pay some expenses in order for goods to be processed between countries. In other words, it’s going to be a more expensive and time-consuming process than before.

Services are Harder to Predict

Not a lot of people know that services make up around 80% of the UK’s economy. Services trade is very important to us, and service exports have consistently increased year-on-year since 2000. Around half of service trade that we do is with Europe. Manufacturing, construction, transportation and storage make up a large chunk of this. The UK also sells more services to the EU than it buys.

The EU and the UK haven’t currently reached an agreement regarding service trade. The future of this is particularly difficult to predict because many service trade industries have never been fully integrated in a single market. One way to have a guess, however, is to look at service relationships the EU has with other countries.

The EU has recently made a deal with Canada, allowing full access to the single market for goods. Despite this, the deal is much more restrictive for service trade. Other countries like Norway have full access to the single market for both goods and services. Many people believe that the UK could possibly secure a similar deal, but others suggest the EU will not be as generous to us. After all, they don’t want to encourage other countries to leave.

What is your take on this? We’d love to hear your opinion.

Featured Image: © Abi Begum (Flickr)