Two years ago, Brexit dominated the public discussion and showed no signs of going away. COVID changed all of that. With the impact of the pandemic and the associated political and social upheavals, it can be hard to remember that we’re still in the early stages of adapting to our new post-Brexit regulations.
It has only been a year since the end of the Brexit transition period, and, although the data is complicated, we are starting to see some effects of our decision to leave the EU.
At crooton, we see changes in all of the sectors we specialise in. Few of these changes are for the better. Within the finance sector, we see companies choosing to relocate from London into major financial centres within the EU, such as Amsterdam and Frankfurt.
The companies we work with in healthcare are struggling to recruit healthcare staff within the UK following the end of freedom of movement. These staffing difficulties are for all grades of staff and include medical and non-medical staff.
The education sector is facing challenges as well. We are seeing severe staffing shortages, coupled with a dramatic loss of income from university tuition fees. Brexit hasn’t just reduced the number of EU students attracted to UK universities, it’s also caused problems for academic institutions recruiting for new education workers. International students from across the world are less keen on studying in the UK due to Brexit. In a clear indication of the challenges faced by this sector, a flagship scheme to attract Nobel prize winners to the UK hasn’t received a single application.
Despite the difficulties these sectors face, they are still far from the worst affected by Brexit. It’s clear that one industry facing challenges on all fronts is the logistics industry, so we thought we’d dig a little deeper to see what’s going on.
UK Logistics in the year after Brexit
Before we look at the different problems the logistics industry faces, it’s essential to understand the scale of the problem. Logistics firms already operate on incredibly tight margins, often as low as 1 or 2 per cent. This means that minor difficulties can become a severe headache for business owners.
In the years before Brexit, the EU was the UK’s biggest trading partner by a substantial margin. 54% of UK imports and 49% of UK exports were with the trading block. When the transition period ended in January 2021, these numbers fell off a cliff. Exports dropped by 45% in that month and were matched by a drop of 30% in imports.
Many hoped that the initial drop was an anomaly and that trade would pick up rapidly. Although the numbers have slowly increased, they remain historically low. In August 2021, exports were still down by 15%, while imports were down 20% on pre-Brexit levels.
It’s almost impossible to overstate the effect that such a dramatic reduction in trade has on the logistics industry.
To really understand what’s happening, we need to look at how different aspects of the logistics industry have been affected.
The cost of doing business in the EU has risen dramatically, and nowhere is this more apparent than the logistics industry. Processes and activities that were previously simple and cost-free are now time-consuming and expensive.
Importing and exporting between the UK and the EU now comes with an assortment of checks, complex documentation, and sometimes inspection of goods. Even when these processes don’t come with a fee, they cost logistics companies money. Many have needed to hire extra administrative staff to handle the additional paperwork.
Drivers are also waiting longer at borders, which adds to the overall cost of a journey. Trips that had been precisely calibrated might now run at a loss as delays lead drivers to run over their allowed hours and need additional rest breaks.
The loss of imports from the EU has further disrupted the fragile balance of the logistics industry. As if the administrative burden and delays weren’t bad enough, many exporters are finding that they have to cover the additional costs of trucks returning empty from the EU.
The potential damage is so significant for some companies that they have abandoned cross-border fulfilment. This reduces their risk exposure but cuts them off from a substantial portion of their previous revenue. If enough companies withdraw from cross-border fulfilment, the negative impact on the industry could be severe.
Supply chain impact
When members of the public think about logistics, they typically think of finished products and goods ready for consumers. In reality, much of the trade between the UK and the EU has always been components and intermediary products.
Trading these kinds of goods has been particularly hard-hit by increasing regulations and rising costs. With much of the industry operating on a ‘just in time’ model, even a slight increase in the interval between ordering materials and delivery can come with high added costs.
While a consumer can typically wait an extra day for their products, a factory can’t wait an extra day for their materials. A lack of materials can leave workers unable to work. Fixed costs remain, but manufacturers aren’t producing goods and are losing money every minute they wait. These costs then have to be passed on, raising product prices and potentially lowering wages.
The final aspect we need to look at is the impact of Brexit on logistics personnel and recruitment. However serious the challenges we’ve already mentioned are, nothing has reached the public consciousness as much as the difficulties faced by logistics recruiters.
If we’re completely honest, the logistics industry wasn’t in the best shape in terms of recruitment even before Brexit. In 2019, 63% of UK logistics companies reported a shortage of skilled staff, primarily drivers. The reasons for this shortage are complex and include inadequate facilities for drivers, poor working conditions, and relatively low pay.
The barriers to training new drivers exacerbate this problem. A highly-regulated testing system is essential for safety, but our current processes simply can’t keep up with demand. It’s also important to note that the logistics workforce is ageing. A full 45% of drivers are over the age of 45. This means that we are losing more drivers each year than we can replace.
Clearly, logistics firms were already on the back foot before Brexit. What had been a slow decline in the industry suddenly became a flood. EU drivers who had been propping up the system chose to return home rather than remain in the UK with the additional difficulties on top of an already-heavy workload. When COVID was added into the mix, it became a perfect storm.
Now that those EU workers have gone home, we can’t simply replace them. How we fill the gaps in the logistics workforce has gone from being something that kept owners of logistics companies awake to a major headache our political leaders need to join us in addressing.
Reasons for hope
Looking at Brexit’s challenges for the logistics industry is enough to leave anyone feeling somewhat bleak. It’s not all doom and gloom, however. There is the opportunity to achieve something new and exciting in every challenge, and this is no exception.
Workers who can confidently navigate the customs process will become the superstars of our post-Brexit world. Taking the time now to find talented new recruits who can learn and engage with those processes can help put you ahead of the pack. This can be an excellent opportunity for younger workers who are ready to adapt to the rapidly changing rules and regulations.
Now is also a great time to bring new workers into the industry. With the current emphasis on shortages, schools are likely to be open to your participation in outreach programs and careers fairs, giving you access to great younger workers.
Even more helpfully, government funding for apprenticeships and training programmes is already rising and looks set to rise even further.
Finding younger workers can also be a first step in working to increase the diversity of your workforce. The logistics industry has long been populated by older men, with women, people of colour, and the younger generations often underrepresented. In fact, including more women in your workforce doesn’t just give you a great pool of potential workers. It also has the potential to increase your profits as well.
Logistics is facing a difficult year, but you don’t have to face it alone. Working with a partner like crooton can give you the support you need to find opportunities in the changing world of logistics recruitment. Get in touch with a member of the team for help and advice.
To learn more about other challenges facing logistics recruiters, how to improve your logistics recruitment strategy, and a logistics case study, visit the crooton blog!