Richard North, 04/03/2017  
 


I featured Paul Drechsler, president of the CBI, in my blogpost yesterday, marking out his warning about the effects of Brexit on the export prospects for cosmetic manufacturing.

This was to be the content of a speech to the Lord Mayor's Business and Investment dinner at Mansion House, and his comments are now up on the CBI website, repeating the point about cosmetic manufacturing.

What marks this event are two things. Firstly, while as Pete says, there is no "walk away option", Drechsler does at least "get it". When it comes to the "walk away" or WTO option, he realises that it would have a considerable impact on businesses, far beyond the tariffs which so obsess politicians and much of the media.

The second thing is how few others get it. For instance, the adverse effects of Brexit on the cosmetic industry are similar to, but less severe than the effects on the chemicals industry, through the application of REACH.

Thus, when Steve Elliott, CEO of the Chemical Industries Association, got the opportunity to give evidence to the House of Lords EU Energy and Environment Sub-Committee, you might have thought he would raise the alarm.

But, together with Finella Elliott (no relation), Climate and Environment Policy Adviser for the EEF, all he could manage is a low-key mention of having to get the product into the marketplace through representatives who, according to Finella Elliott, "will register the [chemical] substance for you".

Nothing was said of the legal status of the "only representative" and the fact that UK-based manufacturers could no longer export on their own behalf, or that, in all probability, their newly-appointed representatives would have to submit anew nearly 6,000 registrations for their clients, at enormous cost and inconvenience, with the potential to cause great damage to the export trade.

In fact, so low-key was the discussion that, when it came to the main report, their Lordships missed its significant and did not even refer to it. We see a similar lost opportunity in the Commons Brexit Committee, where the Society of Motor Manufacturers and Traders (SMMT) has given written evidence.

The essence of the problem has been graphically argued on this blog, yet all the SMMT could offer was that: "should customs procedures be introduced, it would create additional administrative burdens and considerable impacts on the UK automotive sector, raising costs and damaging competitiveness".

New procedures, says the industry body, would have a negative impact on both the productivity and competitiveness of the UK automotive sector. "So as to prevent these negative outcomes", it adds, "government should keep the UK within the EU Customs Union and continue to apply common customs procedures".

One can see the essence there, but the language is so flat, and devoid of any sense of crisis, that the significance of what is being said barely registers. Previously, on 25 January, to the Home Affairs Committee we had Andrew Baxter give evidence. He is managing director of a company called Europa Worldwide Group, one of the largest distribution companies between the UK and Europe. About 80 percent of its business is trade between the UK and Europe.

He talks of loads coming from the EU, where trucks will literally just come through the tunnel and drive straight through - here are no checks whatsoever. If a truck comes from a non-EU country, such as Switzerland, and customs don't want to check anything, that would delay the vehicle by about an hour or an hour and a half. If customs wanted to do a documentary check, that could delay it by up to three hours, and if there was an inspection of the goods, that could delay it by up to five hours.

Any of those timeframes is not too bad, Baxter says. Normally, you would still be able to deliver the goods on the day that they were supposed to be delivered.

The issue comes much more when you are talking about delaying trailers with multiple shipments from multiple customers, because then one shipment can cause a delay—that delay could be enough to stop that trailer hitting distribution, therefore delaying the distribution of all those goods.

I believe there are very significant things that the Government needs to do in order to preserve transit times of goods going from Europe into the UK or from the UK into Europe, if it wants to preserve the transit times of goods.

Obviously, that is a very important matter. Mainly, what we are talking about is increasing transit times for a proportion of goods. It is very hard to judge what proportion that might be. It might be 30, 40 or 50 percent of goods being delayed by a day.

Those things are very important because in today's world everybody wants products—people want to order things today and receive them tomorrow. If transit times turn the time for receiving them from 24 hours into 48 hours, or from 48 hours into 72 hours, that is quite an issue

There would need to be the assumption, he says, that customs are ready to deal with that increased volume of clearances. There would be an enormous increase in the workload for customs. If you are asking about their being fully prepared, which is a very significant challenge, there are issues, Baxter warns. The requirement for change is significant. For example, today we deal with customs in Tilbury.

Our hub, he says, is in Dartford and we bring non-EU goods into the terminal there. Customs close at 4 o'clock in Tilbury, so you have to have goods arrive at our terminal before 3 o'clock in order to get them into distribution the next day. If that was the arrangement going forward, you would be talking about a very substantial proportion of goods having an extra day's transit time.

First, it is about additional transit time. Secondly, that has implications within the sector because it would require products coming in to effectively be stored for one day.

Distribution centres do not necessarily have the capacity to suddenly store lots of products, so there are consequences arising from that. In addition, you are talking about the fact that customers would have to pay customs clearance charges.

An importer might have to pay, for example, £50 for a consignment as a customer clearance fee for the goods coming in, or an exporter might have to pay £15 or something for an export clearance for goods going out. There are a range of issues, including the cost of customs clearance and whether any tariffs are involved.

One of the biggest issues is delaying goods and extending transit times. That is a big issue. Having a secure supply chain is massively important to our customers, as is knowing that the goods that are supposed to get to them in 48 hours actually do and that they do not get caught up in a customs process. The idea that things can get snagged in a process is a real problem.

Some of the things around transit times are probably bigger issues for our customers than the financial issues themselves.

This sort of detail is what everyone needs to be hearing but, more than that, organisations such as the SMMT need to be setting out the practical implications of this. Firstly, there is no question about whether customs procedures will be re-introduced. They will be – and on the UK and EU sides. And if we're talking about an extra day's transit time for the 12,000 vehicles going through the tunnel and Dover Port, this is already a crisis before anything goes wrong.

Mostly, though, this is simply not being reported with the intensity necessary to make it register and bring it up the list of priorities. And even my suggestion that we move to inland ports is fraught, as the road system creaks and, we are told, the rail system is nearing its capacity.

Even when we get the Guardian pursue the subject, it does it badly, with an excessive emphasis on tariffs. You are well into its report before we get to Tim Lawrence, head of manufacturing at PA Consulting. 

He says: "They [car manufacturers] schedule components on the production line and sequence it so parts arrive only hours before. You may think that sounds straightforward, but there is quite an art to this JIT (just in time) supply chain. If you put a customs unit in place [because you are no longer part of a single market] things could be delayed at the border for a couple of day – it really has an impact".

And that is the best he can do: "it really has an impact". Alongside the SSMT's "negative outcome", it is hardly surprising that the politicians and media – unable to think for themselves – are not pressing the panic buttons. The trade groups are asleep at the wheel and are allowing us to head for the rocks at full speed, without so much as a murmur of protest.






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