The Haulage Industry and a No Deal Brexit: Possible Impacts
One of the biggest areas of industry expected to be hit badly by Brexit is the haulage industry; the BBC has recently released an article suggesting no deal would be a disaster for the haulage industry. This is due to UK haulage firms requiring an additional permit to operate in the EU, including Ireland, after Brexit. Where 40,000 permits are required, only 1,200 have been issued to date, meaning the majority of companies will be unable to operate in the EU if a no deal Brexit takes effect on 29 March 2019.
Haulage insolvency statistics
Until 2017, the number of haulage insolvencies each year had been in decline, reaching a low of 143 for the entire year of 2016. The below chart demonstrates there is some correlation between the number of haulage insolvencies and the price of diesel, however the effect is limited with other market factors at play.
2017, however, shows a spike in haulage insolvencies, with more incidents of insolvency than the previous 2 years combined. It appears the very announcement of a Brexit date had a marked effect on the industry before any actual changes had taken place. This suggests that following the referendum result, changes were already taking place in the marketplace, with companies perhaps securing alternative suppliers within the EU for operations on the continent, rather than using a UK Haulage firm as they may have done previously.
Whilst there is estimated to be some decline in 2018, based on the provisional figures used from the ONS, a no deal Brexit on 29 March 2019 is almost certain to lead to another spike on Q2 and Q3 of 2019, depending on the resilience of the haulage firms in question, due to the inability of many firms to trade in the EU from this date.
What are the requirements of a haulage firm after Brexit?
In the event of a no deal Brexit, additional permits will be required to drive freight and haulage vehicles in the EU, which are currently not required. This includes driving over the border in Northern Ireland. Within its no deal planning, the EU has proposed that UK haulage companies will be able to continue to carry goods into the EU, providing that the same right applies for EU firms operating in the UK, without any additional permits. However, this is only a temporary measure due to expire on 31 December 2019.
Rather than being a solution to the issue, this is viewed as pushing the issue 9 months down the road and has yet to be confirmed. Regardless, a no deal Brexit would result in a cliff edge for many haulage firms, the only question is when.
In addition to the requirements for permits, a lack of customs arrangements would mean additional checks would need to be carried out on each vehicle. The Road Hauliers Association (RHA) estimates that each vehicle would take 45 minutes to be checked, leading to enormous queues if these checks are carried out at the ports. It should be noted however that these checks can be carried out away from the border at specific inspection posts.
In the event of a no deal Brexit, the value of the pound is expected to plummet, which will have a significant effect on fuel prices (Norway being the largest exporter of fossil fuels to the UK). With the number of haulage insolvencies being sensitive to the current fuel price this will have a further negative effect on already struggling haulage firms.
What’s next for the haulage industry?
With the current deal on the table, for which there is disagreement amongst MPs on how it proceeds, the transition period would provide another year to seek to resolve the issues, over and above the no deal proposals currently on the table. Whilst this could provide some relief for the haulage industry, allowing certainty on contracts until at least 31 December 2020, this is still not a solution to the overall problem.
Until there is a long term trade and customs deal with the EU, uncertainty will continue to weigh upon the haulage industry. However, as this industry is key to so many other industries, a deal in relation to the haulage industry will be a high priority for all parties involved on both sides of the border. As a preparatory measure, separate firms and drivers can be set up on both sides of the border, however this is an expensive option and may not be viable for struggling haulage companies in the long term.
Until a deal happens, we recommend owners of haulage companies, particularly those who are currently struggling financially take advice on the position for their company as soon as possible, particularly with the requirements of an operators licence requiring you to do so and inform the traffic commissioners of the same. Our business rescue experts can offer free initial advice relating to your haulage firm in the event it is significantly impacted by a no deal Brexit.