The departure of the UK from the European Union is causing widespread uncertainty after a deal focussed on a smooth exit was voted down by the UK House of Commons, leaving logistics and trade in a state of uncertainty.
While the global affects of the feared ‘no-deal Brexit’, an eventuality in which the UK leaves the EU in March with no deal in place, aren’t as seismic as that of the US-China Trade War, they are causing widespread anxiety amongst leading transport firms.
The International Air Travel Association (IATA) has warned that global growth is at risk due to Brexit concerns, while logistics giant Kuehne + Nagel has warned that it has begun implementing contingency plans and pleaded with the UK to avoid a ‘Hard Brexit’.
What does ‘Hard Brexit’, ‘No Deal’ and ‘Soft Brexit’ mean?
A Hard Brexit is a complete exit with no trading agreements in place between the UK and EU, and is seen as dangerous because trade will have no clear legislation to travel over UK-EU borders, causing a stem in the supply chain.
A No-Deal Brexit is even worse in that there wouldn’t be any trading agreements in place, nor any political agreements, leading to a frenzied situation and stemming trade flows.
A Soft Brexit is a now unlikely eventuality in which the UK leaves the EU while maintaining in the EU Customs Union and thereby playing by EU rules.
A Soft Brexit is good news for trade, yet its detractors say it isn’t really a ‘Brexit’ at all, as the UK would still abide by EU trading regulations.
What Happens Now?
After UK Prime Minister Teresa May’s deal was struck down in the House of Commons, her position as leader of the Conservative party is now under great threat, especially after leader of the opposition Labour Party Jeremy Corbyn tabled a no confidence vote in her, springing a vote on her leadership from the whole of parliament.
While it is unclear exactly what will happen, Teresa May (or a potentially new leader) will have to either re-negotiate with the EU and create a new deal, call a General Election (in which the people vote for a new leader), or have another national vote on whether to leave or stay in the EU.
What Does This Mean for Trade?
UK and EU ports and airports are on high-alert, as are any countries which do significant business with the UK.
The main thing the transport and logistics sector is looking for is clarity, and that is the one thing they are not getting.
Because of this, companies such as Kuehne + Nagel have begun planning for a no-deal scenario so they are prepared for the worst outcome.
Such an outcome would most likely see the UK and EU resort to World Trade Organization rules in the short-term.
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