With less than two months until the EU referendum takes place, there continues to be rising uncertainty over how a Brexit might impact businesses across different industries. Research published by Deloitte in March found that Britain’s biggest businesses are in support of the country staying within the European Union, with the majority stating they are unprepared for a Brexit taking place – but what should logistics firms in particular be thinking about?
With ecommerce reaching new heights, retailers are expanding their reach beyond the saturated UK market into international territories. The development of sophisticated and reliable international delivery services means that retailers can now reach customers overseas without having to expand their physical presence with stores in other countries. This international growth has created a new field of opportunity for delivery firms, who have extended their services and partnerships to transport goods of all sizes via air, road or sea. However, as with most industries, the logistics sector is likely to feel the impact if the UK leaves the EU.
Firstly, and before the decision on a potential Brexit has even been made, uncertainty is wreaking havoc with the value of sterling. Since November 2015, the pound has fallen 7% against the dollar, and 10% against the euro, with a Brexit likely to result in further falls in the short term. Exchange rate fluctuations are not unusual, but the changing value is making international commerce a complicated matter, with retailers in danger of losing margin. This in turn will have a knock-on effect for those logistics partners tasked with making the cross-border deliveries.
Logistics companies are likely to be hit by the introduction of fees for cross-border trade and transportation, with likelihood that tariffs will be introduced against certain goods – similar to the USA tariffs on books and shoes. Retailers are locked into an ever-growing battle for the lowest delivery costs – with many offering free delivery of purchases to consumers – but the cost of overseas delivery is likely to rise significantly to account for these additional charges that do not currently exist for the UK. In addition, as Customs restrictions become tighter in efforts to claw back taxes, there is likely to be delays in items’ transit times, impacting retailers’ delivery propositions. These trends could see logistics firms adjusting their offerings, with those specialising in international delivery experiencing a drop in demand due to increased costs and delivery times.
Mirroring this concern, it was reported recently that several supermarkets considering European expansion may now put their plans on hold due to the EU membership uncertainty and the impact that the changing circumstances might have. Concern from these industry giants creates a ripple effect in the sector, with many smaller retailers and ecommerce traders becoming nervous and putting their plans on hold. With logistics being so closely tied to retailers and their decisions, it is crucial that delivery firms are communicating with retail partners and understanding where the hurdles lie. By closely monitoring trading levels and costs, logistics companies can ensure fluctuations and market changes are managed as efficiently as possible amid economic and political uncertainty.
