Brexit chaos at the ports: why is this a problem now, but was not a problem before the EU?

[Filbert]

@bob_2

As a middle-class Brit, sitting in Middle England, I don’t see why there is any argument. If I ran a business that depended on imports from Europe, I would be increasing stock levels to iron out the problems that will inevitably occur in May/June. ‘Chaos’ implies a lot of people running around like headless chickens, and although there will be disruption, I doubt that chaos will ensue.

Both sides are making a strong case to support their ideology; it’s most likely that reality will fall somewhere in between the two extremes.

Businesses will over-stock some things, yes. But that can only possibly be a partial solution. Current projections are for 6 months of disruption, and we import around 40% of our food. There isn’t enough warehouse room available for supermarkets to suddenly store that much food instead of the few weeks worth they currently keep on hand (not can a lot of fresh food be stocked up like that).

Farms can’t ramp up production in any meaningful way to compensate fast enough, and even some of the home grown stuff will be affected; we currently (in a good year) produce enough wheat to directly feed people, but we also import grain as cattle feed. Crops for April (and there’s very little harvested that time of year) would be already in the ground, there’s no changing that now. A no deal would definitely mean a huge shortage of fresh food. There’s no way around that.

More urgently, there also aren’t enough cold stores available to store 6 months of insulin and other temperature sensitive drugs for the NHS, even it was possible to advance order that quantity, which it isn’t, not in the time frame available. Even stuff made here is likely to require ingredients processed overseas.

In Cornwall, we’re projected to be one of the hardest hit areas from any disruption, and ‘chaos’ sounds like a pretty good term. 3 days of snow stopped lorries from Portishead last February and it was over 2 weeks before the shops were properly stocked again. Our supply chain is very fragile. It’s built around the assumption that stuff will be available immediately, or in a few days at most. There isn’t time to completely rebuild it before the end of March.

[Mijin]

@psychonaut

Yes there was. Have you read the posts previous to yours?

To be honest I missed the post correcting about 1990, but note that I said public internet: I am well aware the internet existed prior to the late 90s but I was trying to say something like “widely-available, and to non-technical consumers” in fewer words.
Anyway, whenever we decide the internet technically was started doesn’t really matter to the rhetorical point I was making.

[Cheesesteak]

@bob_2

As a middle-class Brit, sitting in Middle England, I don’t see why there is any argument. If I ran a business that depended on imports from Europe, I would be increasing stock levels to iron out the problems that will inevitably occur in May/June.

This reminds me of the old adage I invented:

Give a hungry man a fish, he eats for a day.
Teach a hungry man to fish, he eats for a lifetime.
Teach a million hungry men to fish, you’ll have a million hungry, angry men with fillet knives fighting for space on the dock.

Your thought is reasonable (though costly) for one business owner. You pay for extra stock and extra storage, but it gets you through the tough times.

When EVERY business owner all over the country has to do the same thing, it simply doesn’t work. Imports would have to double for 2 months to provide 2 months of extra stock. You probably fill all the country’s warehouses after the first 2 weeks of double import, then where does the stuff go? Who is going to pay for it all, it’s a TON of cash to lay out in advance.

Strategies that work for the individual often don’t scale up to work for everyone at the same time.

[Ludovic]

@Cheesesteak

When EVERY business owner all over the country has to do the same thing, it simply doesn’t work. Imports would have to double for 2 months to provide 2 months of extra stock. You probably fill all the country’s warehouses after the first 2 weeks of double import, then where does the stuff go? Who is going to pay for it all, it’s a TON of cash to lay out in advance.

Just put it in all the consumer storage facilities, assuming their breeding rate has exploded just as much in the UK as it has in America. Did people suddenly just have more stuff? I’m assuming rather that most of them are empty.

[Ramira]

@Cheesesteak

When EVERY business owner all over the country has to do the same thing, it simply doesn’t work. Imports would have to double for 2 months to provide 2 months of extra stock. You probably fill all the country’s warehouses after the first 2 weeks of double import, then where does the stuff go? Who is going to pay for it all, it’s a TON of cash to lay out in advance.

Strategies that work for the individual often don’t scale up to work for everyone at the same time.

As in fact the reporting from the Financial Times today is highlighting - the evidence for the impending chaos in the case of the No Deal is in the increasing emergency stockpiling actions and the

Business leaders fear deteriorating economic conditions in UK

“Britain’s largest businesses feel Brexit is having a more profound impact on British business than our business leaders thought it would a year ago — 67 per cent of “captains” think that their company is worse off,” said Ben Page, chief executive of Ipsos Mori.

…

Paul Drechsler, former president of the CBI and chairman of Bibby Line, the privately held group whose interests span financial services, shipping and marine, said a raft of research published before Christmas underlined the challenge, especially for small and medium-sized businesses.

“When you add up all of that, the bottom line is the vast majority of the UK economy is not prepared and as long as there is uncertainty that stress will be heightened,” he told the Financial Times

…

Mr Drechsler, who is also chairman of London First, the capital’s business organisation, said for business “the totally unacceptable outcome is no deal at all”. Talk about companies putting in place contingency measures to prepare for such a scenario was, he added, “a bit of a myth”.

“The reality is, small companies have neither the resources nor the money to prepare for a no-deal.”

A critical indicator, according to Mr Drechsler, was the level of investment. Recent figures by the Office for National Statistics showed three successive quarters of falling business investment.

and Factories in Brexit Britain boosted by surge in stockpiling

… Mr Phipson reiterated the consensus among British business that “no deal is simply not an option for UK manufacturers”.

Almost four-fifths of companies surveyed said delays at customs would be a risk, underlining the need for frictionless trade after Brexit. Britain’s car industry in particular has repeatedly warned of the consequences of a no-deal Brexit on its just-in-time delivery systems for components to its plants. More than six in 10 companies surveyed are already looking to stockpile components and raw materials, as well as evaluate suppliers, to help mitigate the direct impact of Brexit.

for the persons following this, the red warnings for the chaos (the chaos being the disruptions and the disorganization, it does not mean necessarily it is no preprations running around) of the No Deal Brexit from the sheer lack of the availability of the physical infrastructure capacity in the first three to six months are everywhere, as the rush to companies try to squeeze into the limited initially available spaces.

The FT has highlighted this in an article in the beginning of this past December: Business ramps up stockpiling as Brexit uncertainty rises: Trend pushes up warehouse rates but highlights limited scope of no-deal preparation

…
The BoE’s agents found that advance booking of warehousing space was now “the highest it has been in some time”, so much so that some companies were taking leases “on chilled storage even for non-perishable goods, in order to secure the space”. It added that many suppliers were planning to build inventories up to twice their usual level, enough to withstand two to four weeks of disruption.

However, hoarding will only go so far to mitigate the risks.

Drugmakers are building stocks beyond the level mandated by government, but as Pinder Sahota, general manager at Novo Nordisk, noted last week: “if all patients requested an extra prescription from their doctors . . . four weeks of stock would be wiped out.” Carmakers rely on a constant cross-border flow of trucks to feed just-in-time manufacturing processes, and say they would need unfeasibly vast stockpiles to maintain production if trade routes were blocked for any significant length of time.

Space and cash limit preparations
There are two big constraints that apply to all sectors: space and cash.

Temperature controlled warehouses are scarce. Some supermarket chains may have room for manoeuvre — Mr Pool said that Asda had previously listed 18 warehouses on Stowga that it had now reoccupied.

But Ian Wright, head of the Food and Drink Federation, said last week that for those without in-house capacity, chilled and frozen storage space was now in effect booked out.

There is still vacant space in standard warehouses, despite pressures caused by the growth of ecommerce. But these are usually let on long-term leases of at least five years. Companies do not want to make such a commitment as a hedge against temporary disruption.

“At the moment they are stockpiling into the most flexible space,” said one landlord, who had received inquiries from companies not yet willing to commit. For now, he said, businesses were likely to turn to third-party logistics providers such as DHL for short-term warehousing. “Once that runs out or the situation becomes permanent, we can see them signing five-year leases.”

Real estate analysts agreed there had been no rush yet for long-term tenancies, although Kevin Mofid, head of industrial research at Savills, said Brexit was probably one reason for a sharp rise this year in speculative developments of warehouses with no identified tenant.

For listed multinationals, stockpiling is an unwanted expense.

“At the end of the day you are tieing up cash,” said Duncan Brock, a group director at the Chartered Institute for Procurement and Supply. “You’ll end up with obsolescence. You’ll pile up stuff and end up with stuff you can’t use.”

For small businesses cash flow can be an existential issue. “At any one time, we have £200,000 tied up in transport,” said Peter Davies, co-founder of OSSL, a steel group whose products include horseshoes for much of Europe’s equine population. “With a 10-day delay, you’ve got £1m floating around. That is cash we may not have . . . That’s our biggest fear.”

The tracking in the industrial supply chain press is saying the same thing.

The U.K. government recently instructed all its agencies to actively plan for a no-deal Brexit, according to Reuters. The three contracts granted to carriers by the Department for Transport are part of the agency’s contingency plan to keep freight moving after Brexit. The European Sea Ports Organization warned in March 2018 a no-deal Brexit could turn ports into bottlenecks and “disrupt long established supply chains.”

However, the European Shippers Council warns no amount of preparation can completely prevent “big disturbances in trade.”

Part of the reason is the supply chain infrastructure to facilitate trade is already at capacity. Warehouse space is already fully utilized, leaving no space for emergency stock. Logistics service providers are already completely booked for the period around Brexit, and automation is at its limit, according to the Council.

the emphasis added.

The evidence of the impending chaos in the case of the No Deal Brexit is in the figures for the companies that have not as of the last month even begun the preparations - they will begin too late if they have to, as the p

Further evidence can be seen in that one of the sea transport providers the UK government has retained for the emergency transport to alternative ports still has not been able to secure the vessels it needs (of course it is already a sign of a certain chaos and bad organization that a firm with no track record and no operating vessels and a management with a track record of the failed operations has been retained for something so high profile).

This is all the reasonable evidence of course for any professional rational analysis - it is like seeing the stress cracks in the structural supporting beams and hull and saying, “it is the evidence that there will be a collapse if there is not a counter-measure, this is not a sea worthy vessel” - of course some parties say “well if it has not yet ruptured there is no evidence.” Bon voyage for No Deal.

ETA

@Ludovic

Just put it in all the consumer storage facilities, assuming their breeding rate has exploded just as much in the UK as it has in America. Did people suddenly just have more stuff? I’m assuming rather that most of them are empty.

It would be a bad assumption according to the data I have cited, the availability of the storages.

[Malden_Capell]

We’ve been told all those specialist and industry organs are Remoaners, so we can just discard their warnings. They’re not real people.
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[Great_Antibob]

@Ludovic

Just put it in all the consumer storage facilities, assuming their breeding rate has exploded just as much in the UK as it has in America. Did people suddenly just have more stuff? I’m assuming rather that most of them are empty.

The US is an outlier for self-storage facilities. We have an estimated 2.3 billion square feet of self-storage capacity.

By contrast, the UK has an estimated total of 1500 such facilities and at a 0.67 sq ft per capita estimate, well under 50 million square feet of self-storage capacity. And that’s across the entirety of the UK, not just near key docks.

Self-storage is also generally much more expensive than warehouses even without an explosion in demand.

Ignoring specialty requirements (refrigeration and the like), most self-storage units aren’t designed for large scale storage and logistics. Entire shipping containers worth of stuff would essentially have to be subdivided into 5’x5’ or 5’x10’ lots and stored in separate units. It’s also not possible to get heavy machinery into most of them, so that works will need to be done manually using, at best, hand trucks and carts.

[Melbourne]

@Malden_Capell

I’ve had a friend of mine be informed that his wife will be unable to 9 of the 11 drugs she uses, including thyroid medication. The GP has been instructed not to prescribe them.

Pharma companies aren’t like Haribo- they don’t turn their production line to the latest coloured sweet - it takes approx £1-4Bn to bring a drug to market and takes approx 12 years, so they specialise in niche therapeutic areas. So for example AZ focuses on

…

You need a licence to sell a drug its known as Marketing Authorisation (MA). You can’t chop and change your drug supplier like you can your utility bill as every new drug brought to market needs an MA. Its takes up to 210 days to get an MA ( that number is misleading because the “clock can be stopped” during that period if extra things need to be sorted or tested). Plus another 2 months to grant the licence. So approximately a year. So even if we had the forethought to look for new supplies of insulin it would still have taken them a long time to get on to the UK market. We didn’t and so now there isn’t enough time to look for new suppliers.

Observing from a distance, what has this to do with Brexit or Customs Union?

[Dead_Cat]

My take on all this is that the risks are real, and (in the event of there really being no deal, and in that event that people who one day happily let lorries through their ports for some reason decide to stop doing so the next day) should those risks actually look like coming true, some sort of last minute deal will be found. At the moment it’s all political posturing for effect and self-advancement. But even Rees-Mogg ultimately won’t let diabetics die for lack of insulin, or any of the other doom-laden scenarios. Apart from anything else, it would be political suicide.

Bottom line - there will be a deal of some sort, personally I hope it’s something similar to May’s plan, then we can gradually disassociate ourselves from the EU in an orderly fashion and over time that bloated, corrupt, unaccountable, wasteful organisation will eventually cease to have much relevance. I don’t really care if it takes 40 minutes or 40 years, for me it was and is about the principle. And as I have acknowledged before (possibly not on this board, as I don;t tend to get involved in these threads), I am lucky to be in a position to be able to afford to vote on principle, accepting the risks, and I could be wrong, though I sincerely hope not.

[Malden_Capell]

@Melbourne

Observing from a distance, what has this to do with Brexit or Customs Union?

Because for much of the past forty years Britain’s medicinal regulations have been run by the European Medicines Agency, so we’re starting from scratch. Again. No doubt many regulations and medicines will be grandfathered over domestically, but when it comes to medicines coming from abroad, we’re starting at a major disadvantage.
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[Baron_Greenback]

@Malden_Capell

Because for much of the past forty years Britain’s medicinal regulations have been run by the European Medicines Agency, so we’re starting from scratch. Again. No doubt many regulations and medicines will be grandfathered over domestically, but when it comes to medicines coming from abroad, we’re starting at a major disadvantage.

And the EMA was based in the UK. It’s now moving to Amsterdam.

[UDS]

@Quartz

That remains to be seen. Anyway, the point I made is that there is no evidence that there will be chaos. There may be; there may not be. No, companies engaging in risk management is not evidence. To assert that there will be chaos is just as unfounded and ignorant as to assert that there will not. Remember the site masthead - fighting ignorance? There is no evidence so we cannot draw a conclusion. I look at the politicians and despair but I do not jump to a conclusion.

How can there be evidence of events yet to unfold? I think you’re applying the wrong epistemology here. There is no evidence that the US will have a presidential election on 3 November 2020, or that it will not, but this does not mean that we are in a state of perfect igorance about whether there will be a US presidential election on that day; we can in fact make a usefully reliable prediction on the question.

Predictions about what will happen to British trade, commerce and markets in the event of a crash-out Brexit can’t be quite as precise, but we can certainly say that the event will cause massive disruption, massive dislocation, and such evidence as we have suggests that preparations to date have been wholly inadequate. True, the British government may have a secret command centre inside a hollowed-out volcano somewhere where perfect and fully-developed plans have been made and all the necessary plant, equipment, ports, buildings, trains etc are prepared and ready to go. But, as you’d say yourself, we have no evidence of that and on the whole both sommon sense and observation of the present British government suggest that it’s highly improbable.

Whether the disruption and dislocation that will ensue can be said to amount to “chaos” will to some extent be a matter of subjective preference, and whether someone describes it as such may tell you more about his or her subjective attitudes to Brexit than objective assessments of the state of country. But we can way with reasonable certaintly that it will be very damaging.

[Northern_Piper]

@Dead_Cat

… in that event that people who one day happily let lorries through their ports for some reason decide to stop doing so the next day)

There is a very good reason that EU authorities “happily” let British lorries through their ports right now: EU law currently requires them to do so.

Britain is a member of the EU, and therefore British shippers and lorries have a legal right, under EU law,
to ship their goods to the EU in British lorries.

If no deal is struck, there will be a very good reason why that will change on March 30: Britain will no longer be a moment of the EU, and will no longer have a legal right under EU law to ship its goods to the EU in British lorries.

And there will be an additional legal change: Britain will now be a third party country, and under WTO rules, the EU will be barred from giving Britain any special treatment that it doesn’t give to other third party countries, like China or Russia.

So it’s not just some strange Gallic whimsy not to treat British lorries the same on March 30 as they treated them March 29. Britain’s trading status will have changed and the EU countries will be bound by EU law and WTO rules to reflect that change in the way they treat the U.K. lorries.

And, that bit about a deal being struck at the last minute?

Any new deal has to be approved by 27 sovereign countries. Because all the talk about how the EU destroys national sovereignty is not correct. On the most significant issues, like a new deal or the admission of a new member, EU law jealously guards the national sovereignty of its members. Each one has a veto.

For instance, when Canada was close to entering into a Free Trade deal with the EU, it almost got scuppered by Belgium.

And not by the national government of Belgium, but by one canton of Belgium. Because under Belgian law, it’s not just the national government which has to consent to certain types of treaties; the cantons have to consent as well, or else
Belgium hasn’t consented. And the EU respects the internal constitutional structure of each of its members, when it comes to consenting to international agreements. Until that one Belgian canton consented, Belgium hadn’t consented. If Belgium hadn’t consented, the EU couldn’t consent.

So don’t think that on March 25, PM May can just phone up Jean-Claude Juncker and say “we need a a quick deal”. Juncker doesn’t have that authority. He’s said several times that the Withdrawal Agreement is the only deal that the EU can consent to by the March 29 deadline.

That doesn’t strike me as mere political posturing, but rather a statement of political reality.

YMMV, of course.

[Northern_Piper]

Mods, may I respectfully submit that this thread should be moved to GD? Not to make it easier to critique other posters, but because I think the posts over the past few days show that there is not a clear factual answer to the OP’s question.

[Dead_Cat]

My contention is that ordinary people don’t think and behave like politicians and lawyers. I’m trying to imagine how it would apply to my job. If I went into work this morning and was told that due to a change in the UK’s legal relationship with the EU, I was no longer permitted to send emails, my reaction would likely be along the lines of “bollocks to that - I have work to do and that involves sending emails, so I’m going to carry on regardless”. And I know which side my bosses would take on the issue. Why wouldn’t it be the same for lorry drivers, people working in ports, etc? I think there is a fair chance that trade will carry on as normal while the legal issues are sorted out in the background, retrospectively if necessary. More likely is that an official communication will happen some weeks in advance that this is in fact OK, likely in the form of something like May’s deal.

[MrDibble]

@Dead_Cat

I think there is a fair chance that trade will carry on as normal while the legal issues are sorted out in the background, retrospectively if necessary.

You don’t seem to grasp this - there is* no chance of this happening because it would be very, very illegal* by international trade law, and the repercussions would be global.

More likely is that an official communication will happen some weeks in advance that this is in fact OK, likely in the form of something like May’s deal.

Only if May’s deal passed. Otherwise, no, the EU has been quite explicit about this. Do they strike you as joking when they say that?

[UDS]

We are talking here about a no-deal situation.

So you’re suggesting that customs officers at French ports will simply refuse to inspoect goods imported from the UK, and collect the customs that are due? Traffic police will treat UK trucks as licensed to operate in France even though they know they are not? There will be mass mutiny by French public servants who will simply refuse to apply existing laws?

Why would you even think that?

The EU has already indicated which concessions and exemptions it will (unilaterally) grant to smooth (for the EU) some of the worst impact of a crash-out Brexit by the UK. For example UK truckers will still (for a limited period) be permitted to provide services between points in the UK and points in the EU (but not between points in the EU). But the import of goods from the UK won’t enjoy any exemptions from the tariffs, inspections etc that are required for goods imported into the EU, and your notion that port and customs officials will simply refuse to apply these processes to imports from the UK seems . . . odd.

[Malden_Capell]

@Dead_Cat

My contention is that ordinary people don’t think and behave like politicians and lawyers. I’m trying to imagine how it would apply to my job. If I went into work this morning and was told that due to a change in the UK’s legal relationship with the EU, I was no longer permitted to send emails, my reaction would likely be along the lines of “bollocks to that - I have work to do and that involves sending emails, so I’m going to carry on regardless”. And I know which side my bosses would take on the issue. Why wouldn’t it be the same for lorry drivers, people working in ports, etc? I think there is a fair chance that trade will carry on as normal while the legal issues are sorted out in the background, retrospectively if necessary. More likely is that an official communication will happen some weeks in advance that this is in fact OK, likely in the form of something like May’s deal.

This is what you want to be true. It will never be true.
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[Ramira]

@Dead_Cat

My contention is that ordinary people don’t think and behave like politicians and lawyers. I’m trying to imagine how it would apply to my job. If I went into work this morning and was told that due to a change in the UK’s legal relationship with the EU, I was no longer permitted to send emails, my reaction would likely be along the lines of “bollocks to that - I have work to do and that involves sending emails, so I’m going to carry on regardless”.

the e-mails are not in any way a good analogy to this situation.

although I guess this underlines the English incomprehension of what they have chosen to do, not understanding the legal frameworks having forgotten about them in the EU context for the international goods and services.

The analogy you may be able to understand that would be somewhat accurate is if one morning at your work you found that a High Court decision had come down rendering certain sales communications illegal and subject to fines and other penalties.

Your bosses will not accept “bollocks that” as a response.

We know this kind of situation as it has actually occured in the financial sector relative to the inter-banks and inter service providers communications (under your purely UK law so no need to blame us on the continent) and the employers most certainly took it very seriously.

As going against law, well it is illegal, by the definition.

Not just when the persons in the corner pub think it so.

And I know which side my bosses would take on the issue.

as the financial sector example shows, you likely do not know.

Why wouldn’t it be the same for lorry drivers, people working in ports, etc?

Becuase the legal framework in the No Deal makes it a huge risk for the other side - the French, the Dutch, the German, etc. officials opening up without any barriers under an WTO framework means all WTO countries must be availed of this facility. And they have legal grounds to bring action.

It means a big legal risk and/or a flood of the uncontrolled asian goods, uncontrolled MENA goods etc.

Why should the EU members take this risk because the English are uncomprehending idiots who insist in believing in magical solutions and unicorns?

I think there is a fair chance that trade will carry on as normal while the legal issues are sorted out in the background, retrospectively if necessary.

You can think this, it is not true unless you think that somehow the EU members believes that they face zero risk of zero action from the Chinese, the other Asians to get themselves the same access as you English. That is the treaty and the law.

There is certainly pain from having to put in place even the lightest checks as required to treat the generic (the WTO) trade checks, and some emergency transition capacity for things like the critical life saving pharma goods - but this Magical Unicorn resolution idea you have runs in the face of the EU member authorities facing a HUGE risk of actions - very well founded legally - from basically all the other WTO partners (as in basically all other trading partners) to be treated equally to the English. And this has a potential economic impact that is as great, greater even than your impact.

That is why the EU has been practically shouting at you English - and it is you English, not even you British, to start getting serious and stop thinking magically…

More likely is that an official communication will happen some weeks in advance that this is in fact OK, likely in the form of something like May’s deal.

The agreement is Madame May’s agreement, you get that in passing it.

If you do not, you get the WTO regime. It was you Brexit supporters who thought this was a great idea.

May God preserve us from the pub-analysis in the economics.

[Banksiaman]

A question - if companies from a non-EU country broke, or attempted to break WTO regulations by say exporting stuff from the EU without the right approvals, what are the likely legal consequences? Who gets the kick up the backside - the private company or the country? Are there forward penalties imposed, such as restrictions for X years into the future?