Infrastructure: critical asset for the post-Brexit UK logistics market

Customs union, Single Market, EU-citizens logistics workforce in the UK are the most known issues raised by newspapers and media. However infrastructure, although less spotlighted, will have a major impact on supply chains in the post-Brexit UK logistics market – and more widely in Europe.

A recent OECD study of infrastructure in the UK found that it has suffered from under-investment since the 1980s compared to other European countries. The World Economic Forum issued a report in 2015 that compared the performance of logistics infrastructure between 160 different countries: the UK was ranked #9, behind Germany and France but ahead of the USA.

It is well known that a better infrastructure allows a country to be more efficient, more attractive in today’s global competitive environment, to increase productivity and drive operating costs down while supporting other economy sectors short term – such as retail and e-commerce – and the country’s growth rate long term.

As Brexit negotiations are moving now to the next stage – the transition period and the future relationship between the UK and the EU – it is key that the UK remains attractive for investors in a challenging and uncertain environment:

-      The British government quickly sent positive signals to investors by confirming key infrastructures projects such as Hinckley Point, a 3rd runway at Heathrow airport or the HS2 high-speed railway project.

-      It was critical for the Government to ensure the legal rules would remain consistent: the “EU withdrawal Bill” currently discussed by the British Parliament is seeking to preserve most of the EU existing rules currently applicable in the UK as the UK law after Brexit. That should give more certainty to investors short term.

-      Leaving the European Investment Bank (EIB) would mean removing a source of funding for infrastructure projects as well as EU development aid but it is premature to evaluate any possible impact at this stage on future potential projects.

From a business perspective, the following issues have to be addressed for a more competitive infrastructure offer:

-      E-commerce is growing quickly: this sector accounted for 14% of the retail sales in the UK in 2015 and is expected to reach 20% in 2020. Increasing demand from the consumer for quick deliveries means better road infrastructure, high speed transportation network developments and logistics platforms close to major airports. Northern France is currently building up an ambitious logistics development plan – Logistics 2025 – to cope with ecommerce and FMCG logistics growth in the country… and to potentially benefit from Brexit: high-speed transportation networks, logistics hubs near the CDG international airport, warehouse capacity expansion – already 13 million sqm are available that accounts for 17% of the total France warehousing capacity. 1.2 million sqm of refrigerated storage is available, a major asset to attract food and drinks logistics businesses.

-      55% of the goods imported in 2015 in the UK were from the EU and 48% of British exports went to the EU: with an expected increase from 90 million to 390 million customs declarations at the end of the transition period the key issue is whether goods will be subject to borders checks, increasing potentially the need for road and warehouse infrastructure.

-      Airport and ports infrastructure development will be key to success to deliver the post-Brexit “Global Britain” promise: the expansion of the Heathrow airport is already a good signal but further investment in logistics facilities and other airports expansion programs in the UK will be required. The connectivity between airports will be critical in facilitating the UK’s trade expansion with non EU-countries and especially emerging and North American markets.

-      Mega-ships (over 21,000 Teu’s) deployment on the shipping market – with the creation of global alliances – mean that UK ports will have to be even more competitive with Antwerp, Hamburg or Rotterdam. It is critical to further develop efficient port centric operations to serve the UK market including digital solutions and state-of-the-art technology. As a comparison Rotterdam already operate fully automated terminals well connected with inland transport infrastructure.

The UK will be still a member of the European Union up to December 2020 (end of the transition period). Like many other subjects related to Brexit, this is a major opportunity to move on and develop the efficient logistics infrastructure a “Global Britain” will need to support trade’s growth with overseas markets and with the new trade relationship between the UK and the EU. 

Pierre Liguori