The UK government tested lorry traffic capacity at Manston Airport as part of Brexit planning © Dan Kitwood via Getty Images
The UK government tested lorry traffic capacity at Manston Airport as part of Brexit planning © Dan Kitwood via Getty Images

Firms will 'need to adapt supply chains to avoid tariffs'

Will Green is news editor of Supply Management
19 January 2021

Prices for imported goods are predicted to rise by around 5-10% in July when the phased introduction of post-Brexit border controls is completed.

In a report, trade credit insurance firm Euler Hermes said non-tariff barriers would lead to cost increases, while the pound would depreciate against the euro by 3%.

But the report said these forecasts could change “depending on the size and speed of the UK government’s policy response”.

The report said import prices were expected to rise by 2-5% in July “due to the additional paperwork and longer transportation time”.

Additional burdens are predicted for sectors such as timber, electrical equipment, metals, chemicals, pharmaceuticals, computers and electronics, transport equipment (including automotive), and machinery and equipment due to rule of origin regulations.

These rules require a certain percentage of UK inputs for a product to be defined as made in the UK and therefore not subject to tariffs. The report said in most cases this percentage was 55-60%. The average car made in the UK purchased 44% of inputs from UK suppliers but “the proportion of this actually made in the UK is somewhere between 20% and 25%”.

“All in all, foreign inputs for some products… could go beyond 45%,” said the report. “The companies producing them will need to adapt their supply chains in order to avoid tariffs.”

The report said spending of around £100bn was expected on infrastructure at the border and “measures to limit the loss of purchasing power and the rise in inflation starting in H2 2021”.

The report said reduced demand due to the latest lockdown “should keep trade disruption low at least until spring 2021”.

Euler Hermes said it expected the UK to remain in recession in quarter one, but GDP would grow overall by 2.5% in 2021, rising to more than 7% in 2022. “Overall, Brexit could result in an average reduction in the long-term level of GDP of 4%.”

Meanwhile, digital modelling firm Simul8 said increasing check-in times at Dover to 20 minutes, in line with non-EU member customs policy, could lead to a queue of 70,594 vehicles – “the equivalent to a backlog of around 20 days”.

Simul8 said proposed infrastructure changes – including extra parking for 2,000 lorries, new inland customs posts, and extra staffing – would cut overcapacity from 469% to 303%. “This suggests that five new lorry parks of this scale would be needed to bring the situation in line with capacity,” said the company, adding that rerouting freight to other ports would reduce overcapacity further.

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