As we all know, last 23 June, the United Kingdom approved a referendum (with 51.9% of voters in favour) to exit the European Union. This circumstance has unleashed uncertainty, both for the British and for other European countries, concerned about the possible consequences that this might have for British citizens and for the rest of Europeans, in regards to the free circulation of people and merchandise.
For the time being, we know that merely announcing the Brexit’s success had a strong economic and political impact. In addition to Prime Minister David Cameron and European Commissioner for Financial Stability, Financial Services and Capital Markets Jonathan Hill’s resignations, the markets have reacted with a drop in sterling pound value and falling international stock markets. As we can see, news of the Brexit has struck a sledgehammer blow. And yet, what consequences might the United Kingdom leaving the European Union have for logistics companies, and in general, for all companies that import or export products?
Deadlines and consequences of the Brexit for logistics
The process for the United Kingdom to exit the European Union will not be swift; rather, it is foreseeable that it shall take a certain amount of time, due to the agreements that the United Kingdom and the other countries must reach. According to Article 50 in the Treaty on European Union, when a member State voluntarily requests to leave the European Union, it must begin the process by informing the European Council of its decision. After this, there is a two-year deadline to agree upon the conditions under which said State will exit the EU, establishing the type of relation it shall hold with Union member states in the future. After negotiation, an international treaty shall be signed to ratify the agreement.
Although we still do not know what they shall be, consequences for the logistics sector appear bleak. In principle, everything shall depend on negotiations between the European Union and the United Kingdom. Depending on agreements reached, a new legal framework will be established, indicating how transactions will be as of that time. The United Kingdom has a high volume of exportations and importations with the rest of Europe, so any change to the current model shall economically affect many different companies and agents in the sector. Experts indicate several points that will probably change when the UK is outside the Union:
- Re-establishment of customs for moving people and merchandise between the United Kingdom and the European Union. New agreements will need to be established for importation and exportation.
- New duties, which will bear on merchandise prices.
- Greater bureaucratization for importation and exportation processes.
- Slower transport, as there will be more procedures at borders.
However, we must not fall into pessimism; rather, we must begin to develop strategies if we have frequent merchandise traffic coming from or going to the United Kingdom. While waiting to find out what the legal framework governing merchandise movement shall be, we must anticipate consequences and lay out a plan to face these new challenges, which will help this new reality to affect us as little as possible.