How Will Brexit Affect the Logistics Industry Financially?

Most of us are keen to know more about Brexit and its potential consequences. In particular, with a deadline of just over two months, key industries are rushing to prepare for it. One of these sectors is the logistics industry – B2B specialist Tuffnells is one of the firms that guarantees to offer reliable services both before and after our withdrawal from the EU, which is set to take place on the 31 October this year. 

But how will the departure affect the sector as a whole? 

Drop in manufacturing investment 

As many logistics firms focus on either the domestic or international shipment of products, it’s an industry that often directly correlates with manufacturing. If manufacturing undergoes a change in growth, so – most likely – will logistics. As the Brexit deadline looms, experts are predicting that the former industry could be one of the worst hit sectors. 

They argue that every day that goes by without an agreed withdrawal deal results in manufacturers deferring investment, choosing to stockpile goods instead to cushion the effect of a potentially harmful no-deal Brexit scenario. 

A detailed breakdown of the sector from the same source has found that declines in output were steepest in areas like paper, printing and media. As the proposed Brexit deadline draws closer, logistics companies that offer transportation in these areas may experience a reduction in business. 

Potential for “free ports” 

To ease Brexit uncertainty, the government has promised that around 10 “free ports” will be introduced to the UK once we have left the EU. Free ports typically exist outside a country’s customs territory, allowing for goods to be manufactured, imported or exported inside the zone without incurring tariffs. 

While UK companies currently enjoy tariff-free trade with the EU, this is predicted to change once we leave – but free ports could provide some kind of solution. If manufacturers are able to produce goods without added tariffs, the industry as a whole could benefit from growth, which in turn could boost the logistics sector. 

Of course, logistics firms that deliver goods by shipment stand to save on tariff costs themselves, potentially freeing up money for investment.  So long as they continue to offer standard employment rights and follow all tax laws, free ports could help these companies to stay economically stable after Brexit. 

Logistical headache is a likelihood 

Though free ports could offer some form of financial relief for logistics firms, Brexit is still likely to cause a headache for the sector, according to the governor of the Bank of England, Mark Carney. He warns that in the event of a no-deal departure, the country will most definitely suffer a higher inflation rate, resulting in a weaker pound against the Euro. 

While no industry will be able to escape the consequences of this, the two areas of the economy that would be immediately hit are petrol and food. So, logistics firms that deal in the international shipment and transportation of goods will likely face higher delivery costs and a lower exchange rate on exported items. 

Like any historical event, Brexit is likely to impact almost all areas of British society – and our economy, as well as the leading sectors that contribute to it, are no exception. How will its likely effects influence your interaction with the logistics industry? 

Collaborative Post