Brexit increased congestion at UK ports
While the disruption generated by the COVID-19 pandemic is having impacts on all of the world’s ports, post-Brexit trade disruption and ongoing congestion are exacerbating pandemic-induced supply chain slowdowns of the UK, causing build-ups of containers at UK-ports. After an 11-month Brexit transition period, freedom of movement between the UK and the EU member states ended as the dawn of 2021.
The situation has worsened since the beginning of 2021 as freight haulers are rejecting more cargoes due to cross the U.K. border because of post-Brexit customs friction, which is likely to become the new normal. Trading under a post-Brexit customs and regulatory regime have increased the container logjams at major ports. According to the latest data from Container xChange, an online platform for leasing and trading containers, the Container Availability Index (CAx), an index reading of 0.5 describes a balanced market – the same number of containers enter and leave a specific port. Below 0.5 means more containers leave the port compared to how many enter, index values of above 0.5 vice versa.
At the port of Felixstowe, the average reading of the CAx so far in 2021 for a 40 ft container is 0.95, up from 0.79 in 2020. The CAx for a 20 ft box has increased from an average of 0.78 in 2020 to 0.90 this year. A similar picture is apparent at the port of Southampton where the CAx reading for a 40 ft container is 0.86 in 2021, up from an average of 0.71 last year. For a 20 ft container, the CAx reading is 0.85, up from an average of 0.72 in 2020. “The UK’s leading gateway terminals for container traffic suffered congestion for much of 2020 prompting carriers to cut some calls and ship cargo in from European hubs via the Channel Tunnel, ferry services, and feeder services instead,” said Dr. Johannes Schlingmeier, CEO of Container xChange.
British ports are not ready for Brexit customs checks
Several British ports are urging the government to delay the next wave of Brexit red tape, saying that the border checkpoints will not be ready till the July deadline. “It’s obvious that not all of the facilities are going to be ready; how much of it will be is still up for debate,” said Richard Ballantyne, chief executive of the trade body British Ports Association (BPA). “Our frustration with government is they are not willing to share what the plan B is.” The National Farmer Union (NFU) is also warning that livestock trades could come to a halt since no Channel port is planning facilities to check incoming farm animals. Port operators say the delay is partly because of complications with the government’s funding process for the multimillion-pound infrastructure projects.
However, the UK government has attributed much of the chaos to ”teething problems”, arguing that the longer term will bring great opportunity. While Prime Minister Boris Johnson has claimed that there are no non-tariff barriers, with trade free of tariffs and quotas between the UK and the EU maintaining, the ports witness that the new trading regime has brought a lot of extra bureaucracy and cost, which is the main reason of traders suffering. Companies now need to fill out customs declarations, which involve codes and new IT systems, resulting in significant delays. The slower procedures also bring about higher costs. Furthermore, since the UK is no longer part of the EU’s VAT area (Value Added Tax), EU exporters sending goods to the UK have to register with UK authorities and pay UK import VAT. VAT and excise duties are also due on goods entering the EU from the UK.
Irish sea freight trade is avoiding Britain bridge
The volume of freight being shipped across the Irish Sea from Ireland to the UK is down significantly. Firms trying to avoid red tape and potential delays associated with Brexit are sending freight on much longer sea routes directly to the continent, rather than using the traditional ‘land bridge’ route across Britain. Ireland has discovered that it has been sometimes hit by EU import duties because there is no exemption if goods pass through Britain on their way to or from the continent, and they are no longer considered to be of EU origin.
In the third week of February, freight volumes on Stena Line ferries from the Republic of Ireland to GB were down 49% compared to the same week last year, whereas volumes heading directly to France were up 102%. The direct sea routes to France are slightly slower and more expensive than crossing the Irish Sea and then driving south rough Wales and England to cross the Channel between Dover and Calais. However, taking a direct route avoids the new post-Brexit checks and paperwork associated with the Dover-Calais route.
The downside of Brexit
Another issue arising from Brexit is the status of skilled workers employed in the UK but holding EU citizenship. Over the past 20 years, the UK’s population growth has averaged about 400,000, which, despite an aging population, has propelled growth in the labor force and the economy as a whole, creating 6m additional jobs. However, a dramatic exodus of foreign-born residents from the UK due to Brexit represents by far the largest annual fall in the resident population since the second world war. A less open Britain without immigration will be older, less mobile, less diverse, and more insular, leaving more retired people to be supported by a falling working-age population.