Northern Ireland Brexit – Issues affecting Warehousing and Logistics

Brexit and its effects upon Ireland were not entirely evident when the UK population voted to leave the European Union on 23rd June 2016. There are many repercussions for the warehousing and logistics sector.

We all know that in Ireland there’s a land border between the UK, in the guise of Northern Ireland and the country Eire, otherwise known as the Republic of Ireland. In the past, the need for customs and security checks meant that the border was a physical as well as legal and political manifestation. Nowadays, it isn’t a barrier in any practical sense. People can also move freely around the UK, Ireland, Isle of Man and Channel Islands within the Common Travel Area. That means there are no minimal or non-existent border controls or official passport checks for someone travelling from Dublin to Belfast to London. The Common Travel Area, is a pretty informal arrangement that existed before the UK and Ireland joined the EU in 1973.

Ireland has no plans to leave the EU like the UK is in the process of doing. Brexit means that the UK’s only land border will also be an external border from the EU’s point of view. This matters for reasons of immigration and trade in goods.

In practice, the land border is almost completely open, but airlines and ferry operators still require photo ID, which doesn’t always have to be a passport. Passengers are always asked for passports at airports where immigration officers can’t tell that they’ve come from within the Common Travel Area. Nevertheless, people currently can use the open border to travel illegally from Ireland to Northern Ireland and on to the rest of the UK, and likewise in the other direction.

The UK and Ireland are currently part of the EU single market and customs union, so products do not need to be inspected for customs and standards. But, after Brexit, all that could change – the two parts of Ireland could be in different customs and regulatory regimes, which could mean products being checked at the border. The UK government does not want this to happen. The EU has also said it does not want any hardening of the border.

The backstop is a position of last resort, to maintain an open border throughout Ireland if the UK leaves the EU without securing an all-encompassing deal.

However, HM Government document, ‘Explainer for the agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union’, section f. clarifies …

“the unique circumstances in Northern Ireland, including the continuation of the Common Travel Area arrangements, the ongoing protection of rights of individuals in Northern Ireland, and guarantees that, even in the unlikely event that our future relationship with the EU is not in place by the end of the implementation period, there will be no hard border between Northern Ireland and Ireland or a splitting of the UK customs territory.” (14th November, 2018)

However, if constitutional processes leave us with a ‘No Deal’ Brexit, what would this mean? Brexit be’leavers’ advise of a short term negative impact upon the economy followed by sustained new growth and prosperity. EU ‘remainers’ conversely forecast economic Armageddon, causing a long and severe recession, before limited recovery over many years.

It is difficult to predict the impact that Brexit will have upon warehousing and logistics in Ireland, because the manifestations of a final deal or no deal have not been realised.

However, if there is no EU-UK agreement on free trade in goods, there would be some British taxes on imports from Ireland, and vice versa. If there is such a deal, it would be confined to goods originating in the UK or the EU. This is the pattern for the EU’s free trade agreements with countries such as Norway and Canada. Without these ‘rules of origin’, and a way of enforcing them, goods made in a country like China could be imported through Ireland, avoiding UK import taxes.

So, with or without a trade deal, you would need some way of checking on the goods being taken across the border, either to work out the taxes due on them or to verify that they don’t need to be paid. Customs checks aren’t a big problem on the Norway/Sweden border – Sweden is in the EU and Norway is not, there are ‘customs checks’ between those two countries. Vans and lorries carrying imports could be told to attend a customs depot, which needn’t be at the border, with spot checks of commercial vehicles near the border as a deterrent against evasion. It might also be possible to use technology to reduce or eliminate the burden of physical checks.

However, warehousing space will be required regardless of any particular outcome.

Irish businesses are competing with a growing number of online retailers for warehouse space in Britain as fears grow that a disorderly Brexit next March could stop or delay shipments to Ireland’s biggest export market. Irish companies are facing a tightening market for warehousing as retailers in Britain take more storage space to capitalise on the boom in online sales.

“All our clients are reviewing their plans for this,” said Carol Lynch, partner with accounting firm BDO in Dublin. “The difficulty companies are facing, however, is the lack of warehousing space available, in the UK. This is at a premium. Stockpiling also involves a significant investment in products, hitting cash flow.”

The way we shop has contributed to the problem. Growth of online retail (20%) has greatly increased the amount of warehouse space needed in the whole of the UK. The supply of warehousing space has decreased. This was happening before Brexit, amplifying issues that the industry already has. At the moment there is 10.4 million square feet of warehouse space under construction, only a year’s worth of supply based upon the demand from the retail sector at the moment, even excluding any Brexit scenario. Retail giants such as Amazon are stockpiling food for a no-deal putting a great strain on warehousing capacities in that sector.

Across all sectors though there is warehousing space, but it is just tied up in warehouses that are already in use, yet are not full. The problem is that people just don’t know where it is, or have access to it.

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