Brexit Updates: UK Contemplates A New Bill, British Logistics Sector Looks To Avoid Chaos

Summary

  • British PM says if no consensus emerges between Britain and the EU by 15 October 2020 both parties should move on
  • An internal market bill to remove the legal implication from the Brexit Withdrawal Agreement is under discussion
  • The UK logistics companies are worried over border chaos starting 1 January 2020 and demand government to speed up the necessary arrangements to rule out any food or medicine shortages

David Frost, chief negotiator, Brexit talks has said that the UK will not take a backstep on any of its demands with respect to its future relationship with the EU (European Union). He added that the EU side has no option but to understand that the British government is very serious about its position.

UK had left the EU on 31 January 2021 and had got an 11-month negotiation transition period to discuss and freeze the finer details of an FTA (free trade agreement) between the two sides going forward. While negotiation rounds are going on, but both the parties are adamant that their side of demands should be completely met, and are not ready flexible enough on their respective positions.

Apart from other things, two of the major demands of Britain are fishing rights and an independent control over state aid. Frost also said that as far as the subject of having a level playing field is concerned, British concerns must be addressed by the EU before moving forward.

On the other side, EU officials told that Britain needs to be more flexible and realistic in its approach.

According to expert estimates, mutual trade worth around $1 trillion is at stake between Britain and the EU, in case of a no deal Brexit.

New legislation on cards

A UK spokesperson has commented that the country will always keep the interests of its own domestic industry first, and will try and resolve the pending Brexit issues keeping the same in mind. An internal market bill is under preparation, according to government sources.

The proposed bill could possibly make policy changes that take out the legal angle from the Brexit Withdrawal Agreement that was signed by both the parties during January 2020. This new legislation might resolve the UK’s longstanding concerns with respect to the state aid in its favour.

The pound sterling had reached an intra-day peak of 1.23 against the euro on 6 September 2020. However, once the news broke out regarding this new legislation being worked out, the sterling started to weaken on Monday, 7 September 2020. It was trading at a lower value of 1.11 at 12.43 PM on that day.

Also Read: Sterling Expected to Weaken Against the US Dollar

The deadline for the transition period is coming very close and falls on 31 December 2020. Boris Johnson had said if no consensus emerges between Britain and the EU by 15 October 2020, then probably both the sides should move on and proceed on their own paths.

Frost has in fact expressed that the UK is ready for a possibility of a no-deal Brexit and has already prepared itself for such an exigency, in case such a time comes.

Also Read: 3 Main Areas Of Discord In The Brexit

Logistics companies worried over border chaos

However, the logistics companies including the ones getting medicines and food products into the UK from across the Europe are worried that serious supply chains disruptions could emerge in case Brexit trade talks do not materialize. As an extreme case, short-term shortages for food or medicines could arise if proper planning is not done now.

Richard Burnett, chief executive, Road Haulage Association, UK told that it seemed government is keeping the logistics industry in the dark regarding the future course of action, in case of a no deal Brexit. This should not lead to a chaotic border condition after end of December 2020, he said.

Among other things, the UK transportation industry wants clarity on the custom declaration procedure to be used once the nation suspends its ongoing ties with the European Union.

It also wants the government to shed light on the physical infrastructure changes that might need to be made as not much time is left for the transition period to expire.

Proper funding support would be needed for close to 50,000 customs brokerage firms to undertake the elaborate bureaucratic procedures and eliminate any chaos at the British ports, according to media sources.

Eight British transportation trade associations have collectively written to the government for the need for an urgent meeting with the heads of Transport Department and the UK Treasury to resolve the pending issues. These associations include the Road Haulage Association, Logistics UK, Chartered Institute of Logistics and Transport, Cold Chain Federation, British Association of Bar Removers, British International Freight Association, UK Warehousing Association, and the British Vehicle Rental & Leasing Association.

According to government sources, the relevant departments are already on their toes to make changes in the necessary IT systems (including the SmartFreight app) for smooth cross-border transportation, realising that not much time remains in their hands.

Also Read: How is the UK's Logistics Business Faring?

Wincanton plc

Let us now take a closer look at Wincanton plc (LON: WIN), a prominent transport and logistics company in the UK, which is likely to be impacted substantially as a result of the ongoing FTA negotiations between Britain and the EU.

The company share price was trading at GBX 187.00, down by 1.32 per cent points on 7 September 2020 at 9.33 AM from the previous day’s close. At that time, the company’s total market capitalisation was recorded to be worth £236.01 million. The share had an EPS or earnings per share of 0.31 and a negative year to date return of 37.46.

Recently, the company revised guidance had suggested that its profits (pre-tax) for FY 21 could touch £30 million, in case there is no further impact of the Covid-19 pandemic (FY 20 pre-tax profit: £52.9 million). The company has been successful in lowering its structural costs after the coronavirus crisis began since March 2020.

Also Read: Insights on Two FTSE Stocks – Wincanton Plc and Carclo Plc

To sum up, while the British side is increasingly making its standpoint very clear that it will put the interests of its domestic industry first in any negotiations with the EU on a future FTA. If media reports are to be believed, a new bill is under preparation that could eliminate the legal implications from the January Brexit Withdrawal Agreement. At the same time, the British logistics industry is widely concerned and wants government to quickly work out and share the necessary procedural details for a smoother cross-border trading at the UK – EU frontiers.

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