The conclusion of an agreement for Great Britain’s exit from the European Union probably couldn’t have happened at a worse time, coming as it did on the heels of the coronavirus pandemic. In this conversation with SupplyChainBrain Editor-in-Chief Bob Bowman, Kristian Kaas Mortensen, senior director of project44, discusses the negative impacts of both events, while voicing optimism for the future of the U.K.-EU relationship.
SCB: Why were so many businesses unprepared for the pandemic and Brexit?
Mortensen: That's two in one. First, let's take the pandemic. On the European side, many companies have been reasonably resilient to crisis. Lithuania, for example, was among the worst-performing economies in the economic crisis of 2009, but during COVID-19 had the best performing economy in the European Union. That was because companies were ready to deal with the crisis and adapt very fast. When it comes to supply chains and transportation, the entirety of the European community — schools, shopping, factories, airlines, hotels — more or less shut down. What was left working were hospitals, supermarkets, pharmacies, and not too much more. Normally, we have open borders between countries in the EU. But it became almost impossible to travel from one country to another in Europe.
Back in March and April, what kept society going was trucks and other forms of supply-chain shipments. That’s a testament to a very resilient industry. For the first time in many years, we saw truck drivers being hailed as necessary infrastructure, very important people. All in all, when you think how catastrophic an impact it was to see car manufacturing plants shut down and airlines halted to near zero, I'm impressed that under the circumstances it’s going so well.
SCB: Let’s talk about Brexit. There was plenty of warning because of the months and years that it took to negotiate the terms of Britain's exit from the EU. So why, when Brexit finally happened, did so many companies seem to get caught by surprise?
Mortensen: It's hard to give a very short answer. Geopolitically, these two economic superpowers, the EU and U.K., are as close friends as New York and New Jersey. In the long run, everything will harmonize and become natural again. But for trucking companies going from Germany to the U.K., for example, a very large number aren’t accustomed to crossing national borders. They’re not used to customs documents, declarations, VAT or anything like that, because before it was all within the EU. That’s something they haven’t done for the last 20 years. And there were no old-timers saying, "Yeah, we used to do it like this and that." Nobody knew. And then the actual setup was only decided one week before being implemented. Which means that even authorities on the U.K., French and German sides had one week to get their procedures in place, to get their people trained. So we had long queues leading up to Christmas and New Year of trucks that wanted to get out of the U.K. But all in all, it wasn't that bad. January going into February is the low season of the year. A lot of the responsible supply chains and producers had stepped up during October and November and the first half of December. So basically, everybody made it work.
There were a lot of small trucking companies that got hurt financially. If you have five or 10 trucks and a one-way trip from Germany to the U.K., you might go empty coming back. But instead of that empty truck taking half a day, now it could take three or four days, and you're not getting paid and you're losing your profit margin. Again, though, it’s a temporary situation and things will eventually revert. On top of which, there are a number of larger trucking companies that are used to crossing borders. And they were starting to pick up directly from shippers or acting as subcontractors for large freight forwarders.
SCB: We’ve heard quite a bit about the negative aspects of Brexit — the additional costs and customs delays. You, however, sound pretty optimistic that things are going to get back to some semblance of normality. But what actual opportunities do you believe Brexit presents to importers, exporters and logistics providers in the years ahead?
Mortensen: I don't look at it in that way. The biggest place for consumption and GDP in Europe is Germany. And the second biggest is the U.K. Historically, those two are among each other's strongest trading partners, and nothing will change that. U.K. companies get things produced in Germany, and Germany sells materials to U.K. factories. Spain is a major producer of fruits and the vegetables to U.K. supermarkets. This will not stop. It's not like the U.K. can start growing those fruits and vegetables easily by itself. Wine will come to the U.K. from Italy and Spain, and fresh cheese from Italy. And U.K. exports will continue. So besides a bit of paperwork hassle — maybe something gets more expensive and something else gets cheaper — I believe the consumption patterns will continue. I'm optimistic, but I’m still against Brexit.
Timely, incisive articles delivered directly to your inbox.