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World changes impact warehousing

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Peter Ward, CEO at UKWA discusses the impact that globalisation has, and will continue to have, on the UK warehousing sector.

The world has changed and brought fresh challenges as well as opportunities for the warehousing sector. As we know, the global pandemic has exposed the risks of long, interconnected supply chains, possibly heralding the end of globalisation and driving the move to near and on-shoring. This is positive news for UK warehousing, and is part of the story – along with the massive acceleration of e-commerce – behind the record take-up figures for industrial and logistics property reported by the real estate sector for 2020. Both of these trends look set to continue into 2021.

The shortening of supply chains, with inventory held closer to markets, is also likely to increase adoption of automation in warehouses, as technology costs come down and labour shortages rise. In fact, UKWA will be partnering with the University of Bath’s Centre for Smart Warehousing and Logistics Systems later this year to measure levels of automation adoption and assimilation in a survey-based study with members to measure how widely automation and emerging technology is being adopted and assimilated in UK warehouses.

One of the new challenges has, unsurprisingly, been created by Brexit. Despite the positive spin around the Prime Minister’s announcement of the Free Trade Agreement with the European Union, as the details glossed over at the time begin to emerge, businesses are bearing the brunt of a burden of increased regulation and costs.

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Two issues particularly have already been highlighted in the national press and are being reported to us by UKWA members. First the impact of import VAT (strategically not mentioned as the government trumpeted post-Brexit ‘duty free trade’) and the new rules of origin.

Both are starting to affect UK based SMEs trading with the EU, especially those selling products online to consumers, who unlike business traders do not have EORI registrations.

While the larger companies are mostly able to overcome the hurdles, through subsidiaries and/or distributor models, SMEs are finding that carriers are not providing home deliveries in EU countries because they are unable to complete customs declarations for unregistered consumers and are unwilling or unable to act as financial representatives of UK sellers in destination European markets.

In addition, where products are originally imported into UK, they become subject to a second ‘hit’ of import duty on export to a European destination, due to the rules of origin confirmed in the Free Trade Agreement.

Under the new rules, SMEs supplying goods to consumers are being denied access to a market of 250 million consumers across Europe. If, as reported recently by The Observer, a growing number of UK companies see moving to Europe as the potential solution, we could witness a drift of warehousing from UK into Europe, along with loss of jobs, economic activity and tax revenue for this country.

Clearly, this could also lead to marginalization of the UK from a shipping perspective as the number of direct port calls are reduced, along with the number of shipping lines serving the UK. Fewer port calls would be detrimental to our export drive and, if the UK becomes more of a trans-shipment destination (via Rotterdam/ Antwerp), time and cost will be added to inbound supply chains.

On the plus side, UKWA and our members are receiving enquiries from EU traders facing similar issues as a result of Brexit; they are seeking speedy access into UK markets and wish to avoid the risks of delays currently being experienced at EU and UK borders.

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UKWA’s long-held view has been that overall Brexit will be good for our sector, as more warehousing will be required.  However, it is vital that the government addresses the problems swiftly. Our members are reporting full loading bays, with thousands of orders for the EU delayed –in part due to customers and their carriers being unprepared.

We are hearing stories of pallet and parcel deliveries into the EU at a standstill due to missing or incomplete paperwork, and problems over the calculation and payment of VAT. Costs are spiralling, while customers are frustrated and warehouses are struggling with flow and shortage of working space.

One member, for example, has told us that a customer shipping around 200 pallets a week to Europe is considering opening a warehouse in Europe and moving their account, which would mean a substantial loss of revenue. They are also worried about EU related delays impacting on their service to domestic customers. With minimal activity and additional costs, they say the situation is simply not sustainable. They are not alone. It is a picture being reflected right now up and down the country.

As ever, UKWA is here to help. We are providing advice and guidance to those wishing to operate their warehouses as customs bonds, as many of our members do – just one solution to alleviate the punitive rules of origin issues.   We are also forging links between UK and EU service providers and, as ever, we are focused on feeding back from the frontline and ensuring government listens to the voice of the industry!

 

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