It’s been nearly two years since 51.9% of the British public voted to leave the European Union (EU). With the official departure date of 29 March 2019 fast approaching, the government is neck-deep in the process to wrangle an exit deal that doesn’t side-line the UK’s interests, while not kowtowing to the EU’s will. How is it all going? Opinions, it is fair to say, are divided.
What’s not up for debate, at least among shipping circles, is the requirement that British ports suffer minimal efficiency losses as a result of Brexit. According to the UK Chamber of Shipping, 95% of the UK’s trade passes through its ports, making them vital gateways to economic prosperity. EU member states are a massive trade boon to the UK, accounting for 44% of exports and 53% of imports in 2016.
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In March, the UK reached a joint legal agreement with the EU on the legal terms of a Brexit transition period. Following the official departure date next year, the UK will remain in the bloc’s single market and customs union until 2020.
This transition deal has provided the UK with more time to establish new partnerships and plan for the future. Nevertheless, port operators are adamant that the challenges of leaving the EU must be addressed sooner rather than later.
The art of the deal
Leaving the EU’s customs union will allow Britain to negotiate its own trade deals with other countries. UK Prime Minister Theresa May has repeatedly insisted that departing the union will be the best option for the country, and that not doing so would ‘betray the vote of the British people’.
However, maritime organisations are worried that the UK won’t be able to negotiate an equivalent customs arrangement with the EU. This could lead to more physical checks at ports, disrupting the free flow of goods and creating gridlock on roads. Research from Imperial College London has found that adding just two extra minutes to vehicle checks could lead to motorway tailbacks up to 29 miles in length.
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By GlobalDataThe port of Dover, England’s sea-based gateway to France, is particularly vulnerable to this worst-case scenario. The port handled 17% of the UK’s entire trade goods with a value of £122bn in 2017, and is a key crossing point for European freight operators.
Ports are pushing the UK Government to create a customs arrangement that promotes frictionless trade. If it doesn’t achieve this, lines of lorries filled with perishable goods could be stuck not just at Dover, but abroad.
“It remains our aim that we secure as frictionless a trading relationship as possible,” said Maritime UK chairman David Dingle in a press statement. “This is in the interests of both sides of the Channel. Failure to get that frictionless deal will not only see delays and disruption at ports like Dover, Holyhead and Portsmouth, but also in the EU at ports like Zeebrugge, Calais and Dublin.”
Building infrastructure and systems
Pressure is mounting on UK ports to enhance their capacity to support further checks, but a common issue will be finding the space necessary to do so. Karen Wheeler, director general for border co-ordination at HM Revenue and Customs (HMRC), has said that ports should consider building new customs checkpoints inland, allowing businesses to conduct clearance checks in secure locations away from borders.
Then there is the issue of providing enough manpower to deal with the additional workload. According to HMRC chief executive Jon Thompson, around £300m will be needed to finance the 5,000 additional customs officials the organisation will employ by 2019.
The UK Government will begin to introduce its Customs Declaration Service, an enhanced digital solution for handling imports and exports, in a phased deployment from August. Ensuring that the system is up and running by March 2019 is vital for ports, as post-Brexit trade deals are estimated to tack on 200 million more annual custom declarations.
Nevertheless, Dingle has said that the government also needs to boost ongoing projects to improve the country’s road and rail infrastructure, in order to enhance connectivity between ports and the destination of handled freight.
“Once you leave the port gate, you find right away that connectivity to the main markets, and to the other ports, is poor,” he said in a recent editorial. “There is not enough capacity on our rail network, too few lanes, roads and bypasses on our motorway network, and difficult junctions in key bottleneck areas to allow for the smooth transfer of goods.”
Economic op-port-unities
Customs challenges have dominated the UK headlines, but for some ports Brexit may not be all ‘doom and gloom’.
Increased port investment due to Brexit could boost connectivity for ports that may not have received as much attention in the press. One example is the port of Hull, situated on England’s northeast coast. Associated British Ports (ABP) has argued that unlike Dover, the port has large areas of space available to accommodate additional customs checks, and operates on trade routes less likely to be impacted by disruption.
Many port operators are hoping that Brexit will allow the government to review the implementation of the EU’s Ports Services Regulation, which came into force in March last year. The regulation established a legal framework for various services, including towage, waste and bunkering, and makes it easier to track public funding for ports.
However, as the majority of UK ports are privately funded and run, operators have seen the regulation as an affront to their control of ports, with BPA chief executive Richard Ballantyne saying last year the new rules are “unnecessary and unwelcome”. Removing this regulation, operators say, would allow UK ports to prosper uninhibited.
Another recurring concept is that of ‘free ports’: areas which exist within the UK’s territorial borders but are deemed to be outside of the customs border. Goods can be imported, manufactured and re-exported within free ports without being subject to tariffs.
Teeside, also situated in the northeast of England, could benefit from becoming a free port, with local MP Anna Turley saying this would “increase employment and economic activity” in the region. Nevertheless, this is dependent on being outside the EU’s custom union and its trading rules, and this, as already mentioned, comes at a price.
Ultimately, the UK-EU deal will be pivotal to the future of ports in Britain and indeed Europe. Nevertheless, with so many other sectors part of the consideration, the impetus is on the UK’s maritime industry to continue making its demands known to government.
At a recent conference held by the Westminster Energy, Environment & Transport Forum, UK Department for Transport maritime director Roger Hargreaves said that the department would soon release a new port connectivity study to highlight the significance of ports within the UK economy, and bump them up the Brexit pecking order.
“This will be the first time the government has set out in well-evidenced detail the significance of ports, and we’re hopeful that will send a strong signal across government and beyond about the role that ports can play and the way they should be considered,” he said.
