The political situation at the moment is very volatile, with the nature of Brexit yet to be decided. Here we will examine the possible effects that the various versions of Brexit (no deal, Theresa May’s deal etc.) could have, so you can best prepare your business for whatever happens.
The place to start is with the regulations that the EU actually currently impose on postal services in the UK. The European Parliament and the Council adopted Directive 2008/6/EC (the Third Postal Services Directive) in February 2008, setting a deadline for full-market liberalisation of 31st December 2010 for 16 long-term members (such as the UK) and 31st December 2012 for the remaining 11 members. The main rule brought into force was that letters and parcels had to be collected and delivered on at least five working days each week.
The Directive had mixed success, encouraging and stifling competition in different countries. When the UK leaves the EU, however, the Directive will be one of many rules that no longer affect us. The government can then formulate new rules, potentially preventing companies from undercutting others on prices.
It is important to note that approximately 50% of UK exports go to the EU, so the government will hopefully take this into account in their current negotiating strategy. Theresa May’s original deal with the EU, which was voted down in the House of Commons, promised “frictionless access at the border to each other’s markets for goods”.
The government then gives more detail about the concept of the free trade area, reassuring companies that little will change:
“This free trade area would protect the uniquely integrated supply chains and ‘just-in-time’ processes that have developed across the UK and the EU over the last 40 years, and the jobs and livelihoods dependent on them, ensuring businesses on both sides can continue operating through their current value and supply chains. It would avoid the need for customs and regulatory checks at the border, and mean that businesses would not need to complete costly customs declarations. And it would enable products to only undergo one set of approvals and authorisations in either market, before being sold in both.”
The original withdrawal agreement had no tariffs on any goods as well as the introduction of a new Facilitated Customs Arrangement, which would mean that customs checks and controls would not be necessary between the UK and EU. There would also be a common rulebook for manufactured goods as well as agriculture, food, and fisheries products. Yet, as the House of Commons voted against this withdrawal agreement, whether the UK and EU will come to an acceptable agreement at all or the nature of such an agreement is still very much ellusive.
According to www.parliament.uk (the website for the House of Commons and the House of Lords), however, there might be some cause for concern:
“Non-participation in the EU's cross border parcel delivery regime will have little impact on UK stakeholders. However, leaving the customs union and the single market will potentially lead to customs duties, border formalities, and import VAT being applied to parcel deliveries between the UK and the EU (and vice-versa), which would lead to slower delivery times and increased costs for businesses and consumers.”
It is likely that items worth over £15 will be liable for VAT. The price of VAT may even be approximately 20% of the total value of the item. This is particularly worrying for UK based ecommerce brands and might perhaps even hit Amazon hard, as many of their operations go through an EU subsidiary (Amazon EUSarl).
The time that customs would add to both exports and imports to the EU is an important consideration. To compensate, make sure your mailroom is as efficient as possible and, if you can, plan as far ahead of time as possible. Be aware that there will be an adjustment period in any Brexit scenario and to be careful with your business during this time, warning customers of potential consequences and delays that might be incurred.
This interesting article, published in November 2018 in The Financial Times on the reaction of the Royal Mail boss, Rico Back, is a useful reminder that despite the advice dispensed in this article, anything might change, regardless of Brexit, and it is important to be aware of the political and economic climate.
Regardless of the outcome of Brexit, the UK’s GDP is forecast to drop by at least 2.2% and perhaps as much as 6%. Putting this in perspective, our GDP dropped a similar amount to the conservative estimate during the 2008 recession. How did this affect logistics? In 2014, the courier network still hadn’t recovered from the recession of 2008.
Following the 2008 recession, one area which was hit particularly badly was HGVs (heavy goods vehicles, whose numbersdropped sharply. HGV drivers are obviously a very important part of the logistics process, so if they are key to your business it is definitely something to watch out for.
In short, it is very difficult to predict at the moment what the outcome of Brexit might be and, therefore, the outcome for customs and logistics. The best thing to do is to keep an ear to the ground concerning political and economic rumblings and prepare for the worst, rather than hope for the best. If the government manage to get their deal through then little should change, assuming all runs smoothly, but it is difficult to predict how likely that is.