Brexit and Cold Chain Logistics
When Brexit comes into effect next year, companies using temperature controlled transport could find themselves facing increased costs and logistical headaches.
On 23 June 2016 the UK voted to leave the European Union. This was a momentous decision which is expected to have many social, political and, crucially, economic ramifications both for members of the public and for UK businesses.
One industry which is expected to feel the impact of Brexit is the freight logistics sector and, in particular, those companies exporting goods which require temperature controlled transport.
Temperature controlled transport is a critical component of many supply chains. Perishable items such as frozen food, seafood, fresh produce and pharmaceuticals need to be transported at a low temperature in order to reach their end destination in peak condition – failure to do so results in spoiled goods, disappointed customers and lost revenue. Refrigerated freight enables companies to do this efficiently and effectively and it is an important part of the so-called ‘cold chain’.
Currently this area of business contributes £97 billion to the UK economy per year but there are fears that when Brexit comes into effect next year, the sector could find itself battling rising costs and reduced efficiencies.
There are a number of ways in which Brexit could affect temperature controlled transport costs. One of the key outcomes of Brexit will be that the UK no longer has free trade with the rest of the EU. This means that movement across country borders is likely to be slower as additional paperwork will need to be processed and new rules followed, which will ultimately impact on logistics efficiency. Time is of the essence when it comes to transporting temperature sensitive goods and any significant customs delays, if not properly planned for, could result in spoiled goods, wastage and lost revenue. New trade duties and tariffs are also a strong possibility in the wake of Brexit.
In addition to this, a weakened pound could increase the cost of fuel, while restrictions on EU migrants could potentially lead to a driver shortage, which in turn will help to push up wages, and therefore operating costs, across the sector.
Opportunities and innovation
However, while Brexit could pose economical and logistical challenges for the cold chain, some experts predict that Britain leaving the EU could also result in new opportunities for the sector. For example, a rise in the price of fuel could encourage the manufacture and use of commercial vehicles that use alternative fuels. With the cold chain being increasingly criticised for its carbon emissions, this could be a welcome development.
Furthermore, by reviewing their operations and introducing efficiencies and back-up measures, such as new fleets, more effective tracking systems and additional storage facilities, transport companies can mitigate any potential problems caused by Brexit, helping them to keep costs down and remain competitive.
Another possible boost could come from businesses that currently make-do with standard freight, but will need to use cold transport if prolonged delays become a common occurrence.
With so much of the Brexit details yet to be finalised, it’s difficult to predict with any certainty how it will affect the temperature controlled transport sector. There are sure to be changes, but how much impact these will have on costs and performance remain to be seen. What is certain is that those companies who are willing to embrace change and innovate will be best placed to weather any Brexit-related storms and thrive in the new trade environment – however that may look!