What Does Brexit Mean for Global Logistics?

Will Brexit Affect Global Supply Chains?

“It’s the end of the world as we know it…”, goes a popular REM song. A tune that may have persistently sounded inside many people’s mind in the last semanas, after the United Kingdom voted to exit the European Union.

Ok. Maybe it isn’t the end of the world, but it’s an event that may have a deep impact on global trading in many forms, including logistics and supply chain industry. According to Supply Chain 24/7, these sectors “may be among those seeing and experiencing some of the most dramatic shifts and severe implications as the result of the departure,” besides to current challenges that logistics are already facing.

So far, we´ve been able to identify the following consequences:

1. Logistics and supply chain disruptions

Supply Chain 24/7 recently said that “The Wall Street Journal reported that shipping and logistics companies will be forced to deal with supply chain disruptions until updated trade agreements and regulations are established.”

Global markets expect that new game rules will appear soon, and once they’re ok for every player, global tradings will return to normality. It is that gap of uncertainty between these two moments that´s affecting and impacting global logistics.

“In New York, shares for both United Parcel Service Inc. and FedEx Corp. declined at rates of 2.2 percent and 3.8 percent, respectively. Some Europe-based logistics and cargo companies also saw a drop in shares,” Supply Chain 24/7 informed.

2. Prepare for new opportunities

“Avoid immediate reactions, review scenario plans and consider new opportunities,” Gartner consultants says regarding this landmark decision that will surely impact the US$575 billion annual business between the United Kingdom (UK) and the European Union (EU).

Lisa Callinan, research director at Gartner, stands that “the UK could remain a strategic choice to locate EU headquarters, as some will contend that the UK will have more freedom to form trade agreements outside the EU while maintaining a relationship with the EU.”

“The referendum result –Gartner adds- will be a test of the agility and resilience of global supply chain models in the midst of a period of significant change and uncertainty for the EU.”

3. More demand for assistance

According to the Wall Street Journal, “the Brexit vote could have a two-pronged impact in the near term, potentially cutting into the movement of goods but also fueling more demand for services to help retailers and manufacturers navigate changing regulations and trade rules.”

“There clearly is going to be a period of transition here where everyone is trying to figure out exactly how Brexit will take place. But it’s not like the U.K. will stop trading with the EU and the U.S. or anyone else,” said Andrew Clarke, Chief Fnancial Officer at Minneapolis-based C.H. Robinson, quoted by the WSJ.

4.Opportunities for cooperation

Logistic Management says that the worst move that companies can do is to panic. There is a long term history of mutual collaboration between the UK and the United States, so there isn’t reason to foresee a negative scenario.

Quoted by Logistic Management, Thomas J. Donohue, President and CEO of the U.S. Chamber of Commerce, maintained that it is too early for U.S. shippers to panic, however. “Britain has a proud history of leadership in free enterprise and free trade and as a leader of the Atlantic Alliance. Redoubling this commitment to openness in trade and investment, prudent but not overbearing regulation, and close cooperation with friends and allies abroad will be essential in the months ahead,” he said.

5. Be ready for increased demand variability

“Things should become clearer within the next 12 months,” Gartner foresees.

“Brexit will create substantially more demand variability –this consultants add- Professional services companies are already advising clients throughout Europe to cut back spending and prepare for recession as a precautionary measure. In order to manage the situation, supply chain leaders need to develop a range of different business scenarios as part of their sales and operations planning process.”

Have you already felt or experience some Brexit effects in your local market or industry? I invite you to share your opinion about this.

Francisca is the Business Development Director of Drivin, a SaaS transportation management solution that generates an optimized delivery plan, improves customer service, and reduces transportation costs by up to 30% from day one.