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A catalyst for change

02 December 2019

CEO of the UK Warehousing Association, Peter Ward, considers the impact of Brexit on the vital warehousing and logistics industry.

At the time of writing this piece, there can be little doubt that Brexit – and particularly the prospect of a no-deal Brexit – is having a major impact on the warehousing and logistics sector. Whatever the ultimate outcome of our Government’s negotiations with the EU, it seems likely that businesses trading with Europe are going to have endure more discomfort and uncertainty in the months ahead. As most people will have noticed, in the run up to the October 31st deadline for Britain to leave the EU the Government has ramped up no deal preparations in an effort to ensure that companies who trade within the EU are familiar with their obligations when sending or receiving goods across borders. Indeed, the ‘Get Ready for Brexit’ programme is the largest public information campaign since the Second World War and, in addition, significant sums are being allocated to introduce more border force officers and upgrade the transport infrastructure in and around ports to ease traffic congestion and tackle queues created by delays at our borders.

However, as UKWA has consistently warned, a withdrawal to WTO terms would require in the region of 200 million extra customs declarations, with border checks on animal and plant imports. Currently there are no inspection facilities at the Port of Dover and the necessary time frame required to plan, build and staff such facilities makes it entirely unfeasible as a proposition to mitigate the effects of a no-deal Brexit in the short-term.

The issue of stockpiling as a Brexit precaution has also been much in the news, with reports of warehousing operators enjoying a bumper period of full facilities and sky-high rates. The reality is rather different. Stockpiling is certainly happening; as we reported at our national conference in March of this year, UK factories are stockpiling at the fastest rate in the history of G7 PMIs, with many of our members reporting Brexit-related new enquiries and customers requiring extra space. 

But, it is worth remembering, that warehousing space was in short supply long before Brexit: as long ago as 2015 a report conducted by Savills on behalf of UKWA, found that the key issue facing the UK warehousing sector was a lack of both warehouse space on the market and land coming forward for new warehouse schemes.

The shortage of warehousing has been driven by several factors; the demise of the high street in the face of huge growth in online shopping means that demand for warehousing space  has rocketed; but not just any warehousing space – today’s retailers require high quality, purpose-designed fulfilment centres, located close to populations to facilitate next- or same-day delivery direct to customers’ doors and/or to keep smaller in-town stores regularly replenished and fully stocked.

Essentially, we’ve witnessed a consumer revolution that has put new demands on the warehousing and logistics industry, but the necessary infrastructure to support these changes simply isn’t there. Currently, national vacancy rates for warehousing stand at 6.5% and this figure is lower still in much of the south east where demand is highest.

According to Savills, the market has doubled in the last 10 years, with occupier demand up by 8m sq ft and records being set across most of the country for take up. Recent research has also suggested that 56% of respondents will want more space within the next two years, with three quarters of those being logistics and fulfilment companies.

So, whatever happens with Brexit, it is essential that the government looks again at planning categories and allows more development land to be allocated for warehousing, rather than simply residential housing. After all, every new home is another consumer shopping online and expecting door-to-door delivery in ever shorter time frames.

Another aspect of Brexit to impact upon our industry is access to labour. Again, this is a major problem exacerbated rather than caused by the so-called ‘Brexodus’ of Eastern European immigrant workers returning home. In common with the construction and hospitality industries, the warehousing and logistics sector operates on low margins and utilises low-cost immigrant labour, largely from Eastern Europe. 

In its discussions with Government, UKWA has emphasised the fact that, with the lowest youth unemployment figures in the UK since the 70s, many companies operating in the logistics industry are forced to look to the EU to supplement their workforce and the effects of ‘Brexodus’ – and the introduction of immigration caps post Brexit – will make the situation more challenging than ever. 

Encouragingly, some two million EU nationals have applied for ‘settled status’ that would enable them and their families to remain in the UK after it leaves the Union and, the recent announcement that, following representations from UKWA and other trade bodies, that the Government is reconsidering its £30,000 immigrant salary threshold that would severely restrict the influx of key workers across a variety of industry sectors – including logistics – is cause for cautious optimism.

But, again, there is more to the workforce issue than Brexit. Arguably, retraining is key. How can we support those who have lost their jobs in the retail sector to transition to online fulfilment roles, for example? What of robotics and automation - will this provide the solution to the vexed question of labour shortages? 

The digital world is upon us for sure and those who recognise the opportunity will flourish and grow, but while embracing technology is vital to the survival of businesses operating in this fast-changing industry, there will still be a requirement for people to work with technology. Technology will take the strain of repetitive tasks, improve efficiency, accuracy and productivity, but people will need to step into new roles that require different skills and deliver job satisfaction with higher financial rewards.

In summary, Brexit has brought increased pressure to areas already under siege in our sector, but it has also turned a welcome spotlight onto an industry that invisibly keeps the wheels of industry moving. While we can’t predict what lies ahead for the UK, from a UKWA perspective, our hope is that Brexit will prove to be the catalyst for a fresh approach from government, trigger much-needed change and a re-writing of the ‘rule book’ for warehousing and logistics in this new digital world.

 
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