Brexit planning: part of business resilience
21 October 2020: The Brexit conversation used to revolve largely around processing forms. Now it is more about the CFO grasping that Brexit is a key part of business resilience. This is this view of Tim Morris, Chief Executive of UK Major Ports Group.
“Companies need to understand how Brexit is going to work in their organisations,” Morris says. “CFOs need to reach down into their organisations and ask whether they are ready. Are they resilient enough for what is coming? That is an absolutely crucial role for the CFO.”
The UK Major Ports Group represents more than 40 UK ports which handle 95% of all freight by tonnage that goes into and out of the UK – and it has two huge messages.
The first is: get ready. Regardless of what deal the UK does with the EU, regardless of whether there is a deal or there isn’t, there will be a requirement for UK businesses to undertake border processes when trading with the EU that they haven’t had to undertake before.
“You can go to https://www.gov.uk/transition and try to work it out for yourself, you can contact customs intermediaries, or you can talk to your logistics provider – your freight company or your freight forwarder – about what you need to do,” says Morris. “It starts with some really basic things, like making sure you have an EORI number, but you need to act.”
The second message to CFOs and others is that you need to understand how your shipped goods move from location to location. “At the moment, for a lot of companies, they put their goods on a pallet. The pallet goes on the back of a truck. Two days later it is unloaded at its destination. That’s going to change. The potential delays between the UK and the EU are going to change as well,” says Morris.
“Different ports offer you different options for moving goods to and from the EU. You need to understand your options. There are lots of ports around the UK that are ready and capable of carrying more EU trade.”
Unbundling the processes
So, does it, partly, come down to unbundling the processes you use to move goods in and out of the country? Morris responds: “Yes. Understand your supply chain. Understand what your options are. Understand where the flexibilities and risks are. If you get it wrong, you will incur costs and delays.”
He is emphatic that if you want to maintain a robust and resilient supply chain and a strong service for your customers, you need to prepare, do the analysis and make your choices about both your supply chain and the routes you use.
Morris also reminds us that freight forwarders are a font of knowledge. “Freight forwarders and the British International Freight Association (BIFA) are key parts of the puzzle. They understand the detail of how it all works,” he says.
But let’s not pretend that all ducks are in a row at the ports. “There are still a significant number of moving parts,” concedes Morris. “We still lack some important clarity from the government on the detail in relation to goods travelling by certain modes of transport.”
He continues: “The UK and its ports already have a well-established, well-functioning way of processing goods that comes from the rest of the world. Most big UK ports are expert in this. However, the UK Government has introduced a parallel system specifically for ferry traffic to and from the EU. We are working very hard and very quickly with the government to understand and implement the requirements of the new system.”
The COVID backdrop
And all this is taking place against a backdrop of COVID. “The UK ports have done a fantastic job of remaining open throughout the whole COVID crisis,” says Morris. “They have kept freight moving. Our absence rates have been low. Our operational capabilities and availabilities have been high.”
Inevitably there has been an economic impact and freight volumes have dipped and will probably remain lower than last year for the rest of 2020 but, says Morris, no one goes into the ports business with near-sightedness. This is a long-term game.
“Some of these ports have been around for centuries. We will continue to invest for decades to come,” he says.
Brexit and COVID aside, business as usual include increased digitisation, upskilling, environmental compliance, and so on. “The way a port operates now is significantly different from the way a port operated 20 years ago. In another 10 years, it will be different again. We are moving through a period of increased digitalisation and increased automation, and one of the effects of COVID has been to accelerate the evolution of some of the trends to enable faster collaboration within supply chains.”
He predicts that the flow of data will become almost as important as the flow of goods themselves. “We need to become a gateway for data as well as the gateway for goods,” Morris says.
Investment via the Port Investment Fund to assist with the implementation of the border infrastructure behind the new parallel border processing system is welcome, says Morris. Submissions from ports are underway and it remains to be seen how far provision correlates with need.
But boots on the ground are needed too. Morris points out that it is at least as important to have the right human resources to make borders work as the right buildings and forms. Border force is within the government’s control. Health inspectors are generally provided by local government. This is something the UK needs to deliver on quickly.
The impact of freeports
Also on the government’s agenda are freeports. “Freeports are a potentially interesting and exciting part of the UK’s port landscape,” says Morris. “If you look at where they have been successful, they have stimulated investment, jobs and prosperity for the economy as a whole – but also coastal communities.”
He says that done right, freeports have real potential and UK Major Ports Group is in conversation with the UK Government about how they will be implemented. The ports community is interested and highly engaged in developing the right proposals.
For now, in this state of Brexit cliff-edge, Morris urges companies to speak to the ports, freight companies and logistics experts for help. He says there are many UK ports – not only the most obvious ones – that can offer companies options on the movement of goods and want to help. Reach out to them.
Find a range of resources to help prepare for the end of the transition period on 31 December 2020 on ICAEW’s Brexit Hub.