“Brexit won’t affect me though”

We think that the Brexit withdrawal agreement should be high on everyone’s agendas in the UK – whether you trade between the UK and the EU or not – because the impacts of the agreement (or lack of) will far exceed just those directly involved…and here’s why.

A weakened pound affects the entire UK economy

Since the results of the referendum, the value of the pound has taken a hit that it is yet to recover from. This is made even more volatile by the continued uncertainty of the UK’s exit from the EU, and even doubts whether there will even be a Brexit at all.

The withdrawal process has been fraught with delays that has resulted in the economy effectively stalling significant decisions, as the UK awaits the final outcome before putting any plans into play. 

The most recent of these, the Prime Minister’s delay on her Brexit deal on 11th December 2018, resulted in the pound decreasing to almost its lowest level since April 2017 against the dollar (at $1.2562), and just €1.1059 against the euro – its lowest level since August. Following this, the FTSE share index fell 2% (its lowest since December 2016). The effects of this have significant implications across the UK economy, with reports suggesting that a no-deal Brexit could cost UK households £1,000 a year.

Labour shortages risk hiking up costs for everyone

Brexit will mean that working in the UK will not be as attractive or easily accessible for EU nationals. This has led the CIPD to raise concerns about the effect on the UK’s labour market, which is already under growing pressure with its ageing population.  

For sectors that employ a high share of EU nationals, such as hospitality, healthcare, food production, retail and construction, this could result in significant labour shortages. In the logistics industry, this exacerbates the driver shortagethat is already an area of concern in the UK. According to the FTA, the skills shortage, age demographic (with the HGV driver population significantly older than the national average) and lack of people filling the void left by those leaving the industry has led to a reliance on labour from the EU. This is reflected across other verticals and job sectors too. In fact, difficulty attracting UK-born applicants to fill unskilled or semi-skilled jobs is listed as the most common reason that employers hire EU nationals. This could lead to further labour shortages which, in turn may lead to inflation as workers are in a position to demand higher wages – costs that, ultimately, are passed on to customers.

Stockpiling could drive up storage overheads for UK businesses

Throughout the year, advice, suggestions and concerns about stockpiling has been making headlines. How much safety stock to store, whether to hold in the UK or EU, when to start and how long to continue for has been at the forefront of many Brexit preparation discussions. However, in reality, without the final deal (or no-deal) outcome, investing capital in stock is not a viable solution for many organisations. This hasn’t stopped businesses from getting prepared though. 

Whichwarehouse has reported that enquiries from UK businesses are up 36% year-on-year, whilst those from EU businesses has more than doubled and Google page one search results are up by over 300k extra finds. This is amidst a shortfall of UK warehouse space, particularly driven by the rise of ecommerce and fulfilment warehousing requirements. According to Whichwarehouse, this has, in some circumstances, already led to smaller contracts being evicted to accommodate larger opportunities. Facing limited options and higher rents means that the struggle to find UK warehouse space is a concern not just restricted to UK companies trading with the EU.

They’ll be knock-on effects of EU & UK trading delays to your supply chain 

By now, you will have probably heard of the predictions of just a two minute delay to customs processing leading to a 17 mile queue; of the proposals to transform part of the M20 into a car park to cope with the sheer volume of traffic; and the risk of lead times extending by days, if not weeks, restricting access to vital resources – such as food and healthcare – and jeopardising any sector operating a just-in-time production. However, these tailbacks will not just affect these industries. The effect of long border delays and bottlenecks will have knock-on consequences across the entire UK economy.  In fact, any supplier or customer that trades between the EU and UK could suffer lead time delays that will have detrimental effects on your own supply chain. Whether that’s your supplier having a part delayed and not being able to ship to you, or your customer not receiving goods in time.

What’s more, a no-deal Brexit has the potential to result in what economists call a “sudden stop” – an abrupt, catastrophic dysfunction in a key sector of the economy. Although the current “as-is” situation means that this has, so far, been prevented, there is already evidence of falling foreign investmentFurthermore, with no deal yet confirmed, time is running out for a well devised plan to be executed.

So, how can you prepare for the unexpected?  At Yusen Logistics, we are working with industry leading bodies to support our customers with their Brexit contingency plans.  Want to find out more?  Download our free Brexit Guide here with actions that you can start taking today.

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