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The pain of parting


It was close. Very close. But the decision has been made. 51.9 per cent of Britons voted in favour of an exit from the EU. For logistics in Europe, this step will have a significant impact – although, not necessarily only a negative one. So what happens next? First of all, things carry on as usual. Because, between the vote and the final exit lies a long, long marathon of negotiations. It will take up to seven years before the relationship between the EU and Great Britain has been rearranged, estimates EU Minister Donald Tusk. Alone the rescission of existing contracts is expected to take about two years. And then comes the far more difficult part. Because, so far it is completely unclear what kind of economic relationship the EU and Britain will have in the future. Several models are possible. For example, membership in the European Economic Area (EEA) or a bilateral trade agreement with the EU.

Amadou Diallo [Photo: DHL]
[Photo: DHL]
Amadou Diallo, CEO DHL Freight: “I regret the British vote. And not only because trade barriers are of course a challenge for logistics companies. But we have to accept the democratic decision and deal with it”.

In any case – Britain will have to negotiate with each and every one of the 27 EU member states. And the result will then also require the approval of the European Parliament. “Without any guarantee of success, I'm afraid,” said Tusk to the German Bild newspaper.

Uncertainty inhibiting growth

Britain has the EU's second largest economy. The exit from the community will have negative economic consequences for all involved. 44 percent of British exports go to the EU area, 53 percent of imports to Britain come from EU countries. And trade with third countries is also affected. The British will now have to renegotiate more than 50 free trade agreements with other countries. And that will take some time. Uncertainty will continue until clear regulations have been found. And that will certainly slow down British economic growth significantly.

Christian Labrot [Photo: BWVL]
[Photo: BWVL]
Christian Labrot, President of the IRU (International Road Transport Union) and Managing Director of BWVL: “Splendid isolation, the unfortunate exit of Britain will cause deep scars in the European economy and logistics sector. But it will harm the country itself more than its neighbours. Logistics will help to keep the trenches as shallow as possible and to seize the opportunities for a new Europe”.

The reintroduction of trade barriers will increase the price of imports, while customs controls and more bureaucracy will increase transport times, and the procurement and distribution processes will slow down. And that will be reflected in prices. Of course trade will not come to a standstill, but it will slow down. Accordingly, the transport volume to and from Britain will decline. Trade barriers will also have an effect on the choice of production locations. For example, in the automotive industry, where just-in-time production is widely used.
Whether the Brexit will have only negative implications is debatable. For example, British exports that have become more expensive due to the Brexit could be substituted within the internal market. Other EU countries would benefit from that. According to another scenario, it is conceivable that the expected depreciation of the British pound will inflate the export quota. That too is possible.
The Brexit will linger on for a long time. In one or the other direction. According to the German news magazine Fokus, 48 percent of Italians and 41 percent of French people would like to follow the British example.

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25. March 2016 / Reading time: ~ 1 Min.