Brexit uncertainty affecting logistics contract renewals

Prolonged uncertainty over the terms and conditions of Brexit is beginning to hamper UK firms in their efforts to renew customer contracts that are European in scope and also in tendering for new ones, according to one forwarder.

Richard Perriman, supply chain development manager at London Heathrow-based Horizon International Cargo, said this was one of the takeaways from a recent seminar attended by business leaders in the Thames Valley region.

“A very clear message from this event was that the 29 March deadline date for Brexit is becoming something of a millstone around the necks of UK businesses as they seek the extension of EU-related contracts and pitch for new business, with the growing risk of them losing out to competitors in the EU,” he said. “They are in the uncomfortable position of having little or no visibility when it comes to calculating costs and lead times for getting goods to market as they simply don’t know how the operating landscape will look less than two months from now.

“In addition to the re-introduction of border controls and customs clearance, Brexit may usher in restrictions on the movement of people, which could have a direct impact on companies employing EU nationals. The labour market may become much tighter, driving up business costs significantly.”

He continued: “How can a firm sit down and discuss figures with a customer when there are so many potential variables?”

The current squeeze on warehousing space in the UK, with the stockpiling and forward-loading of goods, is another tangible sign of the uncertainty that Brexit has generated, Perriman noted. A survey by the UK Warehousing Association (UKWAof its members from across the country at the end of last month found 85% had received Brexit-related inquiries. About 75% were unable to take on more business from new customers.

Horizon operates a warehouse in Aylesford, near the M20 access route to Dover, which can accommodate up to 7,000 pallets and is currently hovering at capacity. It caters for both B2B and B2C freight flows with a growing number of Amazon sellers using the facility.

“You only have to look at the surge in rental prices for warehouses along the M20 corridor over the past two years to get an idea of the dearth of available space now, which of course is another source of cost pressure for businesses,” Perriman underlined.

“Most of the enquiries we are getting have been speculative, along the lines of: ‘If we press a button, what would be available and at what price?’.

“As for firm requests, we have yet to turn anybody away, unless the requirement wasn’t a good ‘fit’ in terms of commercial viability or it was outside our scope. We would always endeavour to accommodate a client-in-need, providing it made good business sense”.

Horizon has an annual turnover of US$250 million, a good part of it from handling more than 100,000 air and ocean freight transactions per year on global markets; and Perriman is upbeat on the company’s own readiness for Brexit.

“We have a lot business outside the UK-EU trade lane − for example, in the US and the Far East, China in particular − and are used to dealing with customs clearance procedures for so-called ‘third countries’. While Brexit may mean us having to hire a few more staff, as a flexible organisation we don’t expect it to cause too much upheaval”.

He said freight forwarders could end up benefitting from Brexit, albeit in the short-term.

“The complexity that a no-deal or a hard Brexit would bring to supply chains is likely to lead to forwarders having to enlarge their portfolio of services to customers, and this could also drive new business. But the longer-term outlook is far less clear, with the risk of the UK's economy going into decline as a result of the country withdrawing from the EU and the knock-on effects this would have on shippers and their service providers”.