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Traders can dream of a Brexit-free Christmas – updated

[ October 31, 2019   //   ]

With a General Election agreed and Operation Yellowhammer knocked on the head, ParcelHero says parcel service companies and their customers no longer need worry about a Christmas Customs crisis.

With 31st October the day the UK could have left the EU without a deal. Now, with Brexit on hold until, possibly 31 January, traders can breathe a sigh of relief says the parcel broker’s head of consumer research, David Jinks.

Prime Minister Boris Johnson has accepted the EU’s offer to extend the Brexit deadline until 31 January, guaranteeing a Brexit-free Christmas and while a deal can still be approved before that date under the EU ‘flextension’, there cannot now be a no-deal ‘crash-out’, he points out.

He also notes: “The Government’s £100m ad campaign for 31 October has been stood down. Operation Yellowhammer, the Government’s contingency plan for a no-deal Brexit, has been put back in the tool shed, and there is no longer the chance friends and relations in the EU will be paying unexpected duties on their gifts sent from the UK.”

But he added: “It’s hard to believe we could come so close to the imposition of new red tape and duties on our exports to the EU just before Christmas. This would have precipitated a crisis in warehousing space as Brexit stockpiling and Christmas distribution collided.”

And United Kingdom Warehousing Association (UKWA) chief executive Peter Ward said the extension of the Brexit deadline to the end of January 2021 would relieve some of the pressure on the UK logistics sector as the industry enters one of its busiest times of the year. He commented: “With retailers gearing up for Black Friday, Cyber Monday and Christmas, the previous date set for Britain’s EU departure – 31 October  – coincided with peak season for many UKWA members at a time of the year when UK warehouse and distribution facilities are operating close to full capacity.

“With Brexit now coming after peak season, the extended deadline should allow our members to deliver Christmas without the added risk and impacts of a simultaneous day-one no deal scenario.”

He added that, contrary to some recent media coverage the logistics industry has not been enjoying a bonanza as a result of companies seeking to stockpile inventory:  “The UK logistics sector has been the subject of considerable media focus with reports implying that warehouse operators are profiting from those companies seeking to stockpile inventory in the run-up to Brexit. This is a myth. UKWA members report that, in most cases, the requests they have had for additional pallet space has been from existing customers and, of course, the space is offered to these clients at pre-agreed terms.”

“Furthermore, it is recognised that in most cases storage alone does not generate sufficient margin.  Warehouse operators make their modest profits from handling frequently turning stock and providing value added services such as picking and packing, so they do not simply want a warehouse full of pallets sitting idly on racking.”

Ward also feels that the latest Brexit delay will have minimal effect on demand for storage space. He says: “Those companies that prepared for Brexit did so in run up to the original March deadline.  Data collected by UKWA in September showed little evidence of further stockpiling after April in preparation for October, and we expect little to change in this next period, especially now that the threat of a cliff-edge fall-out has been significantly reduced.”

UKWA has consistently highlighted that the UK’s withdrawal from the EU, whatever the outcome, and whatever the timing, is likely to drive a long term demand for additional warehousing.  Should the UK divert to WTO terms for its trade to and from the EU, some 200 million extra customs declarations will be required, with border checks on animal and plant imports. Such interruptions in the supply chain will naturally lead companies to hold more inventory in their supply chain and therefore more warehouse capacity will be required.

Ward added that while Brexit is not the root cause of the problem, good quality, well-located warehousing space remains at a premium within the UK, driven by the rapid growth of e-commerce.

With the Brexit deadline extended once again, there is a view that frustration and ‘Brexit’ fatigue might cause some businesses to put their Brexit planning on hold. This would be a mistake, says Peter Ward.

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