What A “No Deal” Brexit Means for Shipping

What A “No Deal” Brexit Means for Shipping

no deal brexit

While the US/China trade war has been widely discussed in terms of its effect on shippers, less focus has been put on the ongoing chaos surrounding Brexit – Brittian’s exit from the European Union.

When the Brexit vote happened 2 years ago – though it might seem like a lifetime ago – there was no “expert” on earth that actually thought the vote would go the way it did.

But, in June of 2016, the referendum passed with 52% of voters supporting it. While the reactions ranged from disbelief to anger to exuberance, the majority of news outlets and business leaders were caught flat-footed by the vote.

As an early indication of the chaos that would ensue, the British pound dropped precipitously directly after the results came in. However, not long after, it spiked to historic highs.

In the time since that vote, quite a bit of drama has occurred. In particular, a slew of potential solutions to the main problem – how to accomplish Brexit – have been proposed. However, none have successfully passed through the Parliament.

As a result, there now seems to be a real possibility of what’s being called a “no deal” Brexit.

What is a “No Deal” Brexit?

Imagine that, at the stroke of midnight, every single law and agreement that governed trade between a country and its main trading partners disappeared with no new agreements to replace them. That’s what a “No Deal” Brexit would be – and you can see why that possibility has caused a great deal of anxiety both within the UK, as well as around the world.

Given that over 50% of the UK’s trade is made with other EU countries and the laws and agreements that regulate that trade are made within the EU, an exit from the EU would abrogate those agreements. If no deal is made with the EU upon Brexit’s implementation, all trade, travel, and residency of EU citizens within the UK would no longer have any rules regulating.

In effect, the UK’s economy would be ground to a halt. Just imagine, for a second, that all flights in and out of Heathrow airport had to be grounded because no deals were in place to regulate UK flights within the EU?

In reality, the UK could renegotiate, on an individual level, agreements with each country. However, given the timeline (Brexit is scheduled to go into effect at 11 PM on March 29th, 2019), it’s unlikely to happen.

Arguments for Brexit

Taking no actual stance on the concept of Brexit, it’s important to restate the reasons that were put forward as to why it was necessary.

The EU has, historically, been a more protectionist body. As such, the EU marketing prices have tended to be above global prices, which has hindered the UK from being free to make the best purchasing decisions for itself.

The barriers created by the EU, both tariff and non-tariff, have arguably increased import prices for the UK – removing them could benefit UK consumers and increase their standard of living.

An additional argument that has been made is that barriers have played a role in increased import costs which, as a result, affects competition from abroad. By some estimates, the protection measures by the EU amount to roughly 20% on manufacturing, as well as agriculture.

At a high level, the national sovereignty argument for Brexit is that citizens of the UK are having laws “imposed” on them by unelected politicians from a different country. Brexiteers argue that this is detrimental to their national sovereignty, particularly when it comes to rules regarding immigration.

Arguments Against Brexit

The arguments against Brexit are varied and, in recent months, become even more prescient – particularly in light of the potential of a “no deal” Brexit.

When it comes to trade, “remainers” (those who advocate for remaining in the UK) argue that the UK actually greatly benefits economically from being part of the European Union. In particular, they point to the fact that more than 50% of UK is done within the EU, which has zero tariffs imposed between members countries. In addition, having the backing of a large trading bloc like the EU, remainers argue, gives the UK greater leverage when negotiating with other countries – leverage they would lose if they leave.

What Does a “No Deal” Brexit Mean for Shipping?

Because no one *really* knows what will happen if Brexit goes into effect with no deal, we have seen the UK make some preparations.

Britain’s EU membership allows for easy travel between countries for trucks; however, a no-deal brexit would, at the very least, create significant delays at border crossings for trucks. In order to help deal with this potential fall out, the UK has begun dredging a port that would enable greater access to roll-on roll-off ships.

While this would alleviate some of the congestion, it doesn’t actually solve the “no deal” issue.

What exactly would the process be for a truck carrying goods from the UK entering a nation within the EU with which it has no trade agreement?

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