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VIDEO – Brexit 5 months on. A forwarders perspective
[ November 30, 2016 // Chris ]Tony Shally Managing Director of Espace talking about Brexit and how 5 months on from the referendum it has affected the European freight industry.
Question : How did you feel now 5 months on from the Brexit referendum.
Tony : As the owner of a European road freight company, we rely on the free movement of goods within Europe and a strong Pound to keep our haulage costs down. The 24th June was a very grim day for me, my staff and for the majority of people working in our industry. I feel a bit more positive now. Well I couldn’t feel any worse than I did that day. We have weathered a difficult 5 months and still hit our targets but I know there are tough times ahead.
Question : What’s happened in the European road freight industry since Brexit and how has it affected Espace?
Tony : Our customers have told us that they have been getting more enquiries from their European customers and from new prospective customers. They sent out a lot of quotes and seen some small short term increases in export business.
In the 5 months since Brexit, we have seen a 7% increase in export shipment numbers compared to the 5 months before Brexit. There’s been a very small fall in import shipment numbers for us. We are mostly export driven.
As we pay over half our suppliers in Euros, we have seen our European haulage costs rise dramatically due to the 10% reduction in the value of the Pound against the Euro. We hedged our Euro currency purchases well the day before Brexit, but we have now pretty much used up this pre-bought currency.
Many forwarders did not hedge and within a few weeks had Currency Adjustment charges in place. We currently have a range of CAFs from our suppliers between 6 and 10%. Even though we hedged well, our margin has dropped by over 3% as a result of the weak Pound.
We’ve been speaking to some of our customers to see if they can now pay us in Euros. A few have agreed but most don’t hold an excess of Euros each month so have asked to stay with a Sterling charge from us.
We are now also speaking to some of our customers to try to implement a currency surcharge. Most are sympathetic, but it does not stop some going out on the market to look for cheaper solutions. It’s even worse for our import customers. Their goods are costing them 10% more now to import and we are asking them for increases to cover the increases in our import haulage costs. With import charges approximately double or even triple the export cost, these surcharges can mount into the £100s per import full load.
Question : How optimistic are you about the future for European road freight and how do you think it is going to be affected if we leave the Single market?
Tony : Espace and our competitors are all in the same boat. Companies will still need to get their goods to and from Europe by road. If we lose the free movement of goods, we are all going to get bogged down again in customs issues potentially slowing down the delivery of our customer’s freight. I am concerned about the effect the triggering of Article 50 will have on our industry. We have had nearly 24 years of free movement of goods across European borders. Many European supply chains have been geared up to work on a Just in Time basis.
Drivers haven’t had to stop for long periods of time at border crossings and customs agents. Many exporters and importers now just hold some emergency or minimum stock levels. What they need to keep production going arrives on our trailers when they need it. We could pretty much guarantee this would happen. With 25% of our business now in the European time-critical sector, if we are forced to revert to how it used to be with all goods needing to be customs cleared, there is no way we can provide any guarantees anymore on deliveries. We will be in the hands of the customs agents and border officials as to when our vehicles are released.
Also, the Pound’s volatility is a big concern. With growing concerns about what might happen and no clear Brexit plan 5 months on, I can only see the Pound plummeting further in value. Freight rates will shoot up again, customers who once valued service over price may be forced to buy solely on price, cutting out companies like Espace who sell on value-added. The biggest companies with the biggest buying power will at a considerable advantage, if rate sensitivity becomes a real issue.
I just hope our politicians realise sooner rather than later that Europe won’t let us have our cake and eat it. Free trade and 100% control on immigration will both not be granted to us. We need skilled and unskilled people to come into the UK to help our economy grow. We don’t need bureaucratic customs procedures imposed on us after 24 years of free trade. It will be a disaster for the UK and Europe, after all if they do it to us we will do it to them. I just hope sense prevails and our politicians are ready to make compromises to get us the best deal we can to maintain the status quo, encourage investment and keep our currency stable.
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