Brexit scenarios and logistics

Brexit and logistics - what are the possible scenarios?

24 October 2018

As research in our latest white paper clearly underlines, clarity is not something UK and German business have much of at the moment, particularly, in respect of Brexit.

Even after two years of negotiations, EU talks are still going on and are now at their most crucial phase. The precise details of the UK’s relationship with the EU post-Brexit still s largely unclear, with possibilities including membership of the European Economic Area (EEA) or simply trading under the World Trade Organisation (WTO) ‘Most Favoured Nation’ terms. 

While many of us know what the outcome of the EU discussions could be, do you know what the potential impact any of these given situations could have on logistics? As your experts, helping you guide through the myriad of Brexit updates, here’s Carousel’s quick 101 on all things Brexit to give you an idea of what some of the implications could be.

What are some of the possible Brexit outcomes?

Following the triggering of Article 50, the UK will be leaving the EU on 29 March 2019.

By agreement with the EU, and as set out in the EU Withdrawal Act, the UK could then enter an ‘implementation period’ until 31 December 2020. The purpose of this is to allow for a smooth transition to a permanent future relationship. There are a number of options for this relationship: 

1. UK Government Proposal – the ‘Chequers deal’

The EU broadly accepts the Government’s proposals as set out in the Brexit white paper but with amendments. This resulting proposal is broadly acceptable to the UK Parliament which accepts this as the basis of the UK’s future relationship with the EU.

What does this mean for transport and logistics?

  • A free trade area for goods that protects existing integrated supply chains and ‘just-in-time’ processes
  • No hard border between Northern Ireland and Ireland
  • A ‘common rulebook’ for goods including agri-food meaning the UK commits, by treaty, to an ongoing harmonisation with the relevant EU rules
  • Participation by the UK in those EU agencies that provide authorisations for goods in highly regulated sectors (e.g. chemicals, medicines and aviation).

2. WTO trading relationship – ‘no deal’

Negotiations between the UK and EU collapse with no compromise found between the two sides. The UK Government is unable to find a way forward (e.g. extending Article 50), meaning that the UK leaves the EU without a deal on 29 March 2019.

What does this mean for transport and logistics?

  • Further negotiations will take place at the European Council meeting in October 2018. The UK Government has set out its proposals for the withdrawal deal following a meeting of the Cabinet at Chequers. This will be reviewed and discussed in October before being presented, with possible amendments and alterations, to member states and the European Parliament in December 2018.
  • New customs arrangements at the borders between the UK and the EU
  • Implementation of new tariffs, set by WTO schedules, and other non-tariff barriers
  • Possible border infrastructure between Northern Ireland and Ireland

3. Free Trade Agreement – ‘Canadian option’

The EU rejects the Government’s proposal but the Prime Minister is unable to concede on the ‘red lines’ which she has already outlined. These include the membership of the Customs Union and Single Market. The Government seeks an ‘off-the-shelf’ Free Trade Agreement with the EU instead, replicating many features of the existing agreement between the EU and Canada.

Discussions indicate that to facilitate this outcome, the UK could revert to a European Economic Area (EEA) membership as an interim solution while a Free Trade Agreement is negotiated. It is widely reported that this is likely to be met with suspicion by hard-line Brexiteers who will argue that this could become the final permanent status. 

What does this mean for transport and logistics?

  • Mutual recognition on regulation for the clear majority of goods
  • Continued lack of tariff and non-tariff barriers between UK and EU
  • Exceptions likely to include major elements of the UK economy such as financial services.

4. Continued Customs Union and Single Market membership – ‘soft Brexit’

The UK is unable to secure agreement from the EU for the ‘Chequers deal’, the Government attempts to negotiate a third option based on existing Free Trade Agreements. This is rejected by the UK Parliament (perhaps following a change in policy from the Labour Party) which forces the Government to accept a continued membership of both the Customs Union and the Single Market.

What does this mean for transport and logistics?

  • Rules governing the movement of goods remain the same.

About Carousel's Market leading research on Brexit 

Carousel’s Brexit white paper sets out to determine the preparedness of large manufacturing organisations in respect of their transport and logistics strategies. We deliberately chose to survey businesses in both the UK and Germany – two countries at the core of Europe’s manufacturing heart – to assess the difference in attitudes between the two, and how this may affect future relationships. We set out to find out if these businesses are uneasy about the ‘uncertainty’ that Brexit might bring, or if there is now positivity about the years ahead. To get your copy, simply click the link below.