Brexit – Implications for the Freight Forwarder?

freight-forwarder-brexitWhen the Conservatives were elected in 2015 in the UK, they made a commitment to re-negotiate the UK’s relationship with the EU and to hold an “in-out” referendum. At the time it seemed a distant promise yet here we are with a vote due to be cast on June 23rd and with very serious implications for Ireland Inc. if Brexit became a reality.

In the light of the very close economic and cultural relationship between Ireland and the UK and  the fact that many of our agreements are cemented through EU legislation, if the nature of the relationship between the UK and Europe changes significantly, then there will be significant changes in the UK/Ireland working relationship too.

Cargocare has been operating as a freight forwarder since 1983 and founder Liam Brewer has been in the market for a lifetime……he remembers doing customs clearance on UK imports back in the early days and it would be strange for many in the industry to think that customs clearance between the two countries could be a thing of the future, especially as trade between the two markets continues to be strong, although its importance to the Irish economy overall has been declining in recent years – as many Irish exporters target global markets.

But what are the implications for trade, the likely scenarios with Brexit and what will the impact be for the freight forwarding community? A recent ESRI report “Scoping the Possible Economic Implications of Brexit in Ireland” analysed the situation and this article discusses some of the findings……

Trade Implications

One of the main concerns discussed in the reports relates to an estimated decrease in trade between the two countries – it’s estimated that the reduction could be as high as 20%, which would have a significant impact on both economies but obviously for Ireland the impact would felt more keenly.

The report suggests however that the impact would vary widely across market sectors and for certain merchandise, trade barriers may increase and cause a very significant decrease in trade across some products. This is especially true for sectors like farming, food and drink, which are very vulnerable as they have a high dependency on UK exports.

In terms of exports from Ireland to the UK, the services sector is buoyant in this respect however in the context of imports, merchandise is more important. There is a lot of activity between the two countries in terms of business services and financial services. And the statistics also show how important the UK is to the Irish market in terms of supplying intermediate and consumer goods, including of course the prevalence of UK retailers in the marketplace here.

Trade between Northern Ireland and the Republic of Ireland is lower than might be expected for two countries on the same small island and the value of exports is higher for NI into the ROI than the reverse therefore in that context the implications are more negative for the North.

Possible Scenarios on Brexit

To a large extent, the impact of Brexit will depend on what happens next! In the event that subsequent negotiations result in insignificant further barriers to trade, then the impact would be minimal.

However should the UK end up leaving the EU entirely, barriers to trade would be significantly increased, with a resultant increase on pricing on imports and possible shortages of stock. Worse still, the UK may choose to strengthen trade relations with non-EU countries and this could put pressure on Irish exporters dependent on the British market – agriculture and food are particularly at risk as there could be more competition in the UK market from these countries. On the other hand, it could be argued that British exports to the EU will decline and this represents an opportunity for Irish companies to provide similar, substitute products.

In terms of Irish companies exporting to the UK, because the market will be more price-competitive, this may well bring pressure on small Irish businesses, with a loss in revenue.

Similarly for imports, trade barriers are likely to increase the cost of imports and sourcing imports from other markets will incur higher logistical costs and suitable alternative suppliers may be hard to source.

Implications for the Freight Forwarder

At this point all discussions are conjecture of course but if the UK moves outside the EU then it is feasible that trade between Ireland and the UK will be subject once more to customs controls. This will inevitably increase the cost of logistics as the paperwork needed for this process will be an additional cost to business. It may also add time to the transportation process and inevitably there will be unforeseen delays from time to time.  A recent article in The Gaurdian in the UK suggests that conjecture along these lines is pointless and should Brexit actually proceed, the most likely outcome would be that the UK would negotiate a free trade agreement. It points out that the UK is the largest export market for the EU and in that context, it has a strong negotiating position.

However many British business leaders are sceptical about their negotiating power and they point out that while the UK may have 65 million or so consumers, the EU represents 500 million and therefore has significantly more clout.

Cargocare Services UK and Irish markets

Whatever the outcome of the vote, Cargocare is committed to continuing to offer professional freight services between the UK and Ireland. And if it does come to handling customs clearance – sure we’ve done it all before! If you are looking for a freight forwarder, please do contact us now and let’s talk through your requirements – we offer an expert, friendly and cost effective service.