Brexit continues to have a daunting effect on the air freight industry, particularly as the waiting period is being drawn out further and further; the deadline for the U.K. to leave the EU has now been extended a second time to October 31 this year.
The possibility of a “no-deal Brexit” is also becoming increasingly realistic with the U.K. Parliament’s inability to reach an agreement thus far. A no-deal Brexit would mean the U.K. leaving the EU without a mutual agreement in place, with all prior agreements between the U.K. and EU being canceled immediately with no transition period.
Here, we will look at some of the top concerns in the U.S. and global air freight industry as of late due to the pending Brexit deadline and possible no-deal Brexit.
Should there be a no-deal Brexit, the U.K. would no longer be a part of the European customs union, which currently allows for the free movement of goods between the U.K. and the EU. Leaving this union could create massive delaysfor shippers and forwarders, as all goods being shipped between the U.K. and Europe would have to go through customs declaration and inspection.
Additionally, without a deal in place, British-registered aircraft and air worthiness certifications would no longer be automatically recognized in EU airspace and flying permissions would be denied. To limit the major disruption this would cause to the U.K.’s supply chain, the U.K. government will have to urgently negotiate mini dealswith the EU.
Impact on U.K. trade
As the EU is the U.K.’s largest trading partner, accounting for a whopping 53 percent of its imports and 44 percent of its exports, the increased costs of trade and new logistics issues presented by Brexit would be a hard hit to both parties.
Additionally, Brexit has major consequences for British suppliers, as countries have begun to look for alternative suppliers elsewhere. For instance, Irish and German manufacturers are increasing their efforts to replace their British suppliers with European suppliers, while stockpiling U.K. goods in the meantime.
Impact on U.S. Trade
Trade between the U.S. and the U.K. will also be impacted; as a result of Brexit, the value of the pound fell significantly, while the dollar’s value increased. This makes U.S. exports to Britain more expensive, which hurts both U.S. producers and shippers alike – especially as the U.K. is the fourth largest export marketfor the U.S. The U.S.’s trade with Europe will also be affected, as the value of the euro also decreased post the Brexit vote.
A major current benefit of the European Union’s free trade agreement is reduced cost of the supply chain. With Brexit, supply chains for nearly everything from will be broken. With increased production and distribution costs, the price tag for end products increases. Items like BP oil or Cadbury chocolate could see increased pricing in the US.
Uncertainty and inability to prepare
The unknown is still the biggest issue for the air freight sector, as manufacturers and shippers alike are unsure of how to plan for unknown changes. Many are concerned about sudden changes in the future regarding transportation costs, tariffs and administrative burdens that they will be unable to adequately prepare for. Respondents of the most recent IHS Markit Business Outlook survey noted the difficulties in making a post-Brexit plan due to the lack of clarity on whether the U.K. will continue to be involved in the European single market and customs union.