Richard North, 13/01/2021  
 


One senses that the legacy media is having real trouble following the post-Brexit developments, judging from the paucity of reports and their general sameness. Covid-19, however, continues to dominate the news cycle, and the US presidency soap opera also continues to distract, with some Americans demanding "1 MP each", which seems a bit excessive, especially as they don't call their assembly a parliament.

The big problem with Brexit-related issues is that there is no visual "hook" to provide television appeal, from which the print media can take their cues. Unlike the pre-Christmas border crisis, with dramatic pictures of parked lorries to keep viewers and readers entertained, the media have only scenes of deserted ports and near-empty motorways. They can only be used so many times, before their novelty begins to pall.

The Times, however, is doing its best to expand the range of stories (following in the wake of the Telegraph), with the headline: " Consumers to foot bill as freight costs surge".

This tells us that the cost of shipping goods from Europe to the UK has risen sharply, with the average cost per load from Germany to the UK having risen 26 percent in the first week of 2021 compared with the average for the third quarter of last year. Shipping loads from France has risen by 39 percent on average.

The paper cites Stephan Sieber, chief executive of Transporeon, which tracks freight flows. He says: "There is a strong possibility that some of these price increases will stay around. I can tell you with quite a lot of certainty that this is not just seasonality".

Others question whether the upwards trend will hold when traffic levels return to normal, if indeed there is such a thing as "normal" any more. There may, of course, be a level of opportunism by freight companies, exploiting the uncertainty, in which case the levels currently experienced could subside.

This may especially be the case as costs for Italian loads had increased only by a relatively modest 9 percent, while Polish operators had only hiked charges by 1 per cent. Competition in the industry is still strong.

Nevertheless, with the delays induced by border checks, and with inspection and other fees, plus rising administration expenses, shipping costs are bound to increase. And, if there is a permanent drop in cross-Channel traffic, Eurotunnel, the ferry operators and the port authorities on both sides of the water, will be raising their charges in order to make up for lost revenue.

What is uncertain at this point is whether the drop in cross-Channel traffic, sustained since the new year, will be permanent. If it is, there will be another side-effect, as just-in-time supply chains are disrupted. We may already be seeing signs of this, as Ford has substantially increased the prices of two of its most popular models for 2021.

However, for the moment, Ford is claiming that the rise is due to additional tariffs on components built outside the UK and EU – some of its components are sourced in the US. But if that is a factor for this company, it may have an effect on other products.

For all that, even the mighty Society of Motor Manufacturers and Traders is not sure exactly how things are going to pan out. CEO Mike Hawes says his team "await the details to ensure this deal works for all automotive good and technologies, including specifics on rules of origin and future regulatory co-operation".

On the regulatory front, the automotive industry will have it easier than some industries, as the UK will continue to build to common standards, based on UNECE WP.29 regulations. Even if there is uncertainty about the supervisory functions (whether these can be undertaken by the UK regulator), the industry is spared the cost of running parallel regulatory regimes.

That is not the case for the chemical industry. Not only does it face the prospect of having to conform to separate EU and UK regulations, it is facing significant problems dealing with the fallout from Brexit.

According to a report from the Helsinki-based European Chemicals Agency (ECHA), of the nearly 100,000 REACH registrations in the UK, transfers in only 80 percent of cases were started or completed by the end of the transition period on 31 December 2020.

Where the transfer has been initiated, EU "successors", who will hold the registrations as "only representatives" on behalf of UK producers, will have to complete the procedural steps and accept the transfers by 31 March 2021. If the process is not complete by then, the transfer will be cancelled, and the registration revoked.

For approximately 3 percent of the UK registrations, though, transfer to the EU was not initiated by the end of 2020. This means that the registrations, amounting to 2,900 in number, are now void and will be revoked. The registrants will no longer be able to legally place their substances on the EU market.

This alone represents a significant loss in asset value, reflecting lower income as the products are no longer cleared for sale throughout Europe. But since many RoW nations also use REACH as their standard-setter, global trading opportunities will also be reduced. Whether other countries will accept UK REACH remains to be seen.

Of other sectors, the plight of the Scottish fishing industry has been well-recorded, with the Independent recording that fish prices are "collapsing" by as much as 80 percent, due to what it calls "Brexit bureaucracy". Apart from the immediate losses, it is feared that the loss of buyers may be permanent – something we've previously addressed.

The fishing settlement, hailed as a victory by Johnson, is turning out to be a "catastrophe" for the sector, where the trade barriers which the prime minister said didn't exist are preventing fishermen reaching their traditional customers, with no alternatives in sight.

From the look of it, the turn or agriculture has yet to come. There is some relief that a tariff and quota-free deal has been negotiated, although this may be short-lived.

The full impact of the border SPS regime has yet to be experienced, and livestock producers may yet find that it is very difficult to place their products on the European market and, even where they are successful, transactional costs will have escalated.

For the moment, though, there seems to be something of a head-in-the-sand attitude, with many farmers being led to believe that it will be business as usual, as domestic prices hold firm.

How far the Northern Ireland situation will continue to impact is also up in the air. Disaster stories tend to have a long tail, as they are passed down the media chain from nationals to locals, via the regional, still appearing days after they were originated.

Thus, while UK-wide shortages in supermarkets are being reported, the situation is said to be especially difficult in the province.

On the other hand, the Belfast Telegraph is claiming that fresh food supply lines "back to 95 percent of normal trade", which suggests that some of the more recent reports in the English press are somewhat overcooked.

Despite that, everywhere we look, we see costs escalating, with very little compensatory effects for the moment. And, on the other hand, there are suggestions that the EU will be less badly impacted than initially expected.

Less surprising is that the BBC is surprised by some of the consequences of Brexit. Despite dribbling out a succession of Janet & John "explainers", it will be amongst the last to know what it going on.

Also published on Turbulent Times.






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