Consequences of a no deal Brexit

Rail Freight Group

As we write this column, the political complexities surrounding Brexit are as fraught as they can be. Perhaps by publication date, and as you are reading this, a different way forward will be favoured, but at the time of writing a no deal Brexit still remains a likely outcome. What will that mean for rail freight? No deal has been a potential outcome since the start of negotiations, and many businesses have taken extensive steps to prepare for the possibility, particularly in the run up to the eventually fruitless March deadline. These preparations are being dusted down and refreshed and will continue to stand their owners in good stead in November.

The delay has also given extra time for companies to refine their plans.

Nonetheless, the very nature of a sudden exit means that new systems, however good, are untested and the inevitable glitches and inexperience could still lead to challenges.

For rail freight, the key axis is through freight to and from Europe via the Channel Tunnel. Although rail volumes are small, it is seen as imperative that trains continue to run seamlessly when supply chain congestion is expected elsewhere.

Freight operators have taken measures to ensure that the necessary systems are in place. This has included, for example, getting French railway driving licences for traincrew, as cross acceptance will cease in a no deal scenario.

Fortunately, this is all in place, and we expect that services can continue as now. Equally, Government is working with the industry to ensure that wherever possible customs and other inspections can be made at the receiving terminal in the UK, rather than at Dollands Moor, where physical space and facilities would make it near impossible.

As such, the expectation is that the systems and processes will be in place for a continuation of service at least at current levels.

We are also hopeful that the volume of trade via the Tunnel might increase in future if the route is seen as increasingly reliable.

The extent of road disruption is unknown, and views vary, but there is certainly the risk of short-term delays arising, if nothing else from the implementation of new systems and processes. Over recent months, we have all come to understand just how complex customs is, and how many other border systems will have to be introduced for EU trade (for example animal and plant health, trading standards and so on).

Whilst this is no different to non-EU trade today for the most part, there are thousands of businesses which only trade with the European Union and will need to learn these processes from scratch. Even simple errors might lead to delays, and it will not take long for these to escalate. Fortunately, the ability to do these checks inland for rail freight means they can be picked up well away from the border, and hence it may become an attractive option for some companies.

Elsewhere, some trade appears to have moved away from the Dover Straits already, either coming into other ports as unaccompanied or accompanied trailers, or in some cases moving to lo-lo (lift on, lift off) routes to the east and west coast ports. This is already strengthening the case for rail services, as witnessed by the rapid growth in rail from Teesport, new trains from Liverpool and ambitions to start operations from Immingham and the Humber, with gauge clearance recently completed. These new services emphasise the need for effective inland links, and we are continuing to press the case for freight capacity across the Pennines to support businesses using these new shipping routes.

So, there is the potential for rail freight to gain new traffic, and this is being helped by a recent generalised increase in freight costs since the referendum in 2016. The principal reason behind this has been road driver shortages, and companies buying extra warehouse space for holding extra stock.

The driver shortage is particularly acute, and many logistics firms such as Maritime, Stobart and others are looking to rail to take on the trunk haul activities from port to warehouse, leaving HGVs to do the end distribution.

However, offsetting this is the fear of an economic downturn.

Although rail volumes have remained strong, the construction and manufacturing sectors are already reporting slow summers, and there is a fear that this could continue. Any downturn will eventually impact on rail freight, and indeed passenger traffic, so operators are watching this closely.

How and when the UK leaves the EU will affect rail freight and the wider economy. Businesses have taken the steps they can to prepare, and to take on potential opportunities despite macro level risks. We can only wait and see what happens next.

An opinion column of the Rail Freight Group,