Structural change in the international economic and business environment in recent decades has facilitated increasing integration of the supply chains that deliver products – from food to pharmaceuticals, from clothing to cars and from bananas to ball bearings, to consumers and businesses. The reduction in the barriers that existed to the movement of people, goods, services and capital - as well as information and knowledge - has been central to this. Nowhere has this been more evident than in Europe.
The Withdrawal Agreement Act, which was given Royal Assent on 23rd January 2020, places obstacles in the path of the frictionless trade upon which integrated supply chains, businesses and consumers all depend.
The Single Market is based on four fundamental freedoms: free movement of people, goods, services and capital between EU member states. It is these freedoms that have unlocked the development of pan-European supply chains and associated logistics networks. Nothing changes until the end of 2020 during the transition period.
However, beyond this date, successful trade in goods and services between the UK and the EU-27 will deeply depend on the detail of any trade agreement that is negotiated. Such negotiations are complex and time-consuming; for example, the agreement recently reached between the EU and Canada – the Comprehensive Economic and Trade Agreement (CETA) – was over seven years in the making. Interestingly, most trade negotiations focus on how countries and trade blocs can converge as barriers are removed; negotiation of the new UK/EU agreement is more difficult and unpredictable given that the rationale for Brexit depends heavily on the UK diverging from current arrangements. Furthermore, Brexit means the UK does not automatically remain party to over 40 free trade agreements that the EU has with other countries and trade blocs.
In some ways, exiting from the Customs Union presents even more intractable logistics challenges. The union means that once goods have cleared customs in one country and the commonly agreed tariffs (i.e. the charges imposed on imports) have been paid, they can then be shipped on to other countries within the union without any further tariffs. As the UK will no longer be part of the union. this brings with it the huge new task of checking the details of goods on the thousands of lorries that currently travel to and/or from the EU-27 daily without customs documentation. Currently, the paperwork of the few hundred lorries bound for non-EU countries from Dover is checked daily; this could rise to several thousand daily. In this context, port chiefs at Dover have been widely reported in recent months as suggesting that a two-minute delay in Dover could lead to a 20-mile queue of lorries on the M20 alone.
Operation Brock is the Department of Transport’s temporary traffic management solution to mitigate the risk of cross-channel disruption that may be caused by new post-Brexit border arrangements. However, a perpetual post-Brexit 20 mile tail-back can only really be described as supply chain carnage. The reality is that even apparently short delays can cause disproportionate disruption to finely tuned cross-border supply chains that depend upon just-in-time (JIT) principles. Like dominoes, disruption in supply chains continues relentlessly and it is the manufacturers, retailers and consumers who pay the price.
The role of logistics in relation to the post-Brexit Irish border problem should also be considered. The Good Friday Agreement of 1998 resulted in an open border facilitating frictionless trade between Northern Ireland and Ireland. The reintroduction of some kind of trade friction, leading directly to damaging economic impacts on both sides of the Irish border, is an inevitable consequence of the UK leaving the Single Market and Customs Union.
There has been much talk of “alternative arrangements” which could be implemented to address the post-Brexit Irish border problem. These arrangements will likely be a mix of reengineered logistics processes supported by existing and emerging supply chain technologies. Research at Aston Logistics & Systems Institute suggests that these arrangements may be feasible within the coming decade but that much work remains, particularly in terms of how various technology applications can be deployed in an integrated way which enables seamless movement of product between the jurisdictions.
The logistics, retail, manufacturing and other supply chain companies with which Aston University closely collaborates, have been operating in the context of unprecedentedly high levels of uncertainty, making sensible investment decision-making virtually impossible. It has been supply chain professionals who have been at the vanguard of attempts to mitigate the risk factors that have been created.
However, a lack of understanding of logistics and supply chain issues by British politicians and policy makers has accentuated the problem and contributed directly to the current precarious predicament. The other side of this coin is that logistics and supply chain management have never before featured so prominently in public discourse. There is at least now a realisation that Brexit challenges can only be addressed if logistics and supply chain issues are put front and centre of the policy making and business agenda.
History tells us that business is resilient and adaptable in dealing with major shocks and this will no doubt facilitate a long-term resolution to the inevitable post-Brexit supply chain challenges. However, in the short- and medium-term it is difficult to see anything other than serious logistical difficulties, with a chaotic impact on the wider supply chain ecosystems upon which economic and societal well-being is critically dependent; to some, the impact may well be existential.
Ed Sweeney is Professor of Logistics and Systems and Director of the Aston Logistics & Systems Institute