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Brexit: Decision time

Right now, the whole world is looking anxiously to London. The members of the House of Commons will be deciding on the Brexit deal negotiated by the UK government and the EU. There is no telling which way the parliament’s decision will go. But whatever the outcome, DACHSER is prepared.
Decision time

“Take back control” was the motto for the pro-Brexit campaigners two and a half years ago. On the one hand, they wanted to bring about renewed dynamic growth by recovering the United Kingdom’s sovereignty; on the other, they wanted to put an end to EU bureaucracy and to billions worth of transfers to Brussels once and for all. But even back then, economists were almost unanimous in warning that a move to leave the union harbored more dangers than opportunities. In particular, a sudden, unregulated break with the European Union after more than 40 years would have severe consequences on both sides of the English Channel.

On a knife-edge

Nonetheless, a narrow majority of British voters were convinced by the prospects of regaining independence and voted in June 2016 to leave the EU. Now, just under four months from the exit date set for March 29, 2019, the decision on the future relationship between the EU and the United Kingdom is on a knife-edge. The painstakingly negotiated exit agreement provokes heated debate. Doesn’t it leave the country tied far too tightly to rules and regulations emanating from Brussels— the price for making trade with the Continent as frictionless as possible? How to ensure that no new border is erected between EU member state Ireland and Northern Ireland—while also avoiding barriers between Northern Ireland and Great Britain? Has this planned return to sovereignty been forced to give way to an uneasy compromise?

The deal is controversial across the political spectrum, which leaves a question mark hanging over whether the British Prime Minister Theresa May, despite promoting it intensively, can get a majority to vote in favor. But what happens if the British parliament says no? Observers see little chance of a new referendum being held on the question of Brexit itself. The governing majority also seems to want to avoid calling a general election. There is just as little appetite among most members of parliament for a hard Brexit, which would see the UK leave the EU with no agreement whatsoever. The plan now is to put the question to parliament early 2019, even closer to the exit date, if no majority can be found now. But the clock is ticking.

Does the agreement offer breathing space?

Above all, the agreement that has been negotiated would perform one function: it would give all sides a little more time. During the transition period it foresees of almost two years until December 31, 2020, by which time a trade agreement would have to be reached, little would change from the point of view of business—or logistics. The Single Market would remain largely intact, as would all the benefits of cross-border trade in goods it entails, and the familiar regulatory framework would still apply. During such a transition period, which could even be extended until the end of 2022, all parties would have to return to the negotiating table to thrash out a future trade agreement.

This soft Brexit would make it much easier to maintain supply chains to and from the island. The alternative, a hard Brexit, would have wide-ranging consequences for goods transportation. In this worst-case scenario, without any kind of agreement, the United Kingdom would have to be treated as a third country in accordance with WTO rules overnight, including all customs duties, taxes, and other regulations. This would inevitably lead to huge delays at borders, presumably starting weeks before the exit date at the end of March, as stocks are built up, minimum supply quantities are increased, and transport capacity tightens.

DACHSER is ready

Currently, all that is certain is that nothing is certain. That means the only option for companies transporting goods to and from the UK is to prepare as thoroughly as they can for all eventualities. In this process, DACHSER is supporting its customers in every way possible. “Given the current political uncertainty, we are preparing for every scenario,” says Wolfgang Reinel, Managing Director EL North Central Europe at DACHSER. “We are in a position to react flexibly to this challenge. Because our close-knit network spans Europe, we can re-route shipments when necessary and have ready access to the necessary resources.” 

This is also true for Northern Ireland, which is currently served by DACHSER’s Irish subsidiary Johnston Logistics. Possibilities include setting up additional transit points and creating further warehousing capacity to support goods transportation from the Continent to the island of Ireland, even under more difficult conditions. Customs is another area in which DACHSER can offer its customers comprehensive support. “We have the necessary expertise and processes in place to keep any disruptions here to a minimum. I’m thinking in particular of our AEO status in the UK and numerous EU member states, which makes customs clearance as quick and seamless as possible. We’re also investing in additional staff and IT systems,” Reinel says.

It is difficult to predict exactly how all parties will be affected in the coming weeks. But whatever decisions politicians make, there is no need to assume that there will be a catastrophe. “We are monitoring developments very closely and coordinating with all the affected departments at DACHSER,” Reinel says, “and we’re also in close contact with our customers. Brexit is definitely a new and unusual challenge, but we’ve implemented all the measures at our disposal to keep goods transportation to and from the UK flowing as freely as possible. In the event of a hard Brexit, however, we can all be sure that goods shipments will experience significant delays.”

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