The UK’s decision to leave the European Union has created much uncertainty within the shipping industry, both in the UK and among its trade partners across the globe. In our latest post, we take a look at what Brexit could mean for shipping, and for the businesses and companies that currently trade from or with the UK.
#1 Slower Short Term Growth of UK Container Traffic
The vote to leave the EU immediately threw the UK into a period of economic and political uncertainty. This has set back trading confidence and could lead to slower growth of UK container traffic in the short term. This is further exasperated by slower than expected UK GDP (gross domestic product) growth, which experts are blaming on a post-referendum rise in living costs. At a time of such economic disquiet, it’s typical for households and businesses to slow their spending, which will naturally affect import/export volumes and the shipping trade.
#2 Reduction in UK/EU Trade Volume
As part of the EU, the UK has benefited from the free trade market that exists between the 28 member states. This benefit will be lost on leaving the EU, resulting in an increase in trade tariffs and more complex customs procedures. This could cause a reduction in UK/EU trade volume, negatively affecting the shipping industry.
According to 2014 government-compiled statistics, the UK lo-lo container port sector does 31% of its business within the EU. The percentage of ro-ro traffic, however, was much higher at 78%. Based on these figures you could conclude that Brexit has the potential to be disastrous for the ro-ro sector of the industry, and make a serious dent in lo-lo traffic, but much will depend on the trade agreements the UK makes with its European neighbours.
#3 Increased Trade Outside of the EU
The flip-side of less favourable trading terms between the UK and EU members could be an increase in trade outside of the EU, as the UK is freed to negotiate its own bilateral trade agreements with important partners such as China, India, the US, Canada, Australia and South American countries. As these non-EU partners create the bulk of UK port container traffic volume, the hope is that an increase in trade with these countries could offset any deficit caused by a reduction in UK/EU trade.
#4 Possible Reduction in UK/China Trade
China is one of the UK’s biggest non-EU trade partners (the largest non-EU exporter to the UK and the second largest, after the US, non-EU importer of UK goods). However, this position could be threatened by new trade agreements with other countries that also benefit from low labour costs. Favourable trade agreements with India, Bangladesh or South America, for example, could lead to an increase in trade between these countries and the UK, reducing the trade figures for China.
#5 No Change to Direct Container Services to the UK
One concern of British importers and exporters is that Brexit will lead to a reduction in the direct mainline container services calling at UK ports. This would mean having to use feeder services, adding a further layer of complexity to the shipping process. However, the independent international maritime experts at Drewry aren’t expecting any change to the high proportion of direct container vessel calls to the UK (15 of the 17 Asia-North Europe shipping loops currently call at a British port).
It’s thought that the high trade volumes of the UK would still justify these calls, even if they were to reduce slightly post-Brexit.
#6 More Input into Shipping Regulations and Legislation
One benefit to Brexit highlighted by the UK Chamber of Shipping is that the UK government is now looking to organisations such as theirs to influence decisions and help formulate favourable conditions for shipping, once no longer part of the EU. Where the UK shipping industry has previously had to adhere to EU rules, there’s now an opportunity to develop legislation that specifically suits the UK and is guided by experts in this area and by British companies who are already lobbying the government for simplified trade processes.
#7 Uncertainty Surrounding Free Movement of Labour
The UK shipping industry relies on attracting the best workforce from across Europe, and the current EU free movement of labour agreement makes this easy to do. A potential employee pool that’s reduced largely to the UK is a cause for concern and could lead to reduced confidence from other countries.
#8 Long-Term Impact on the UK Unlikely
Despite the expected short-term impact of Brexit on the UK shipping industry, maritime think-tank Drewry isn’t concerned about long term issues. While there may be changes in the volume of trade between some countries, the hope is that increases will offset any decreases, and it’s thought to be unlikely that Brexit will have an ongoing tangible impact on total UK maritime volume. So, for now, the shipping industry can breathe a sigh of relief that Brexit doesn’t have to spell disaster.