The 5 things to watch in the ports and logistics sector

- Intelligence

22-10-2020


Prospect of No Deal Brexit

There is an increased likelihood that the UK will leave the EU on 1 January without a trade agreement in place, triggering a range of logistics challenges.

  • A combination of customs checks, inadequate customs infrastructure and unfamiliar processes would most severely affect southern roll-on-roll-off ports such as Dover and Felixstowe and associated networks. Ports in the north have suggested that they are equipped to increase handling volumes.
  • Worst-case estimates claim that truck lines could reach 7,000 attempting to enter the UK—causing freight delays of up to two days—according to a government assessment in September. French ports have indicated that they would struggle to cope with non-compliant goods trucks.
  • The government report estimates that disruption would not be immediate, but would gradually increase over days and weeks, with the potential to last as long as three months, as systems and personnel adapt.
  • After that time, there remains long term uncertainty over trade flows as the government has struggled to reach trade agreements with key trading partners. The government may try to reach quick trade agreements in an effort to move out of default World Trade Organization trading rules.

US elections

The 3 November US election may have an impact on global trade flows depending on its outcome.

  • Democratic presidential nominee, Biden has promised to increase taxes on wealthy individuals and corporations, reversing some of President Trump’s tax cuts. He may put corporation tax up seven percentage points to 28 percent and increase taxes on international profits. Such changes could lead to lower growth in the US and affect American demand for European products.
  • If Trump is re-elected, it could pose trade challenges for trade with the EU. He has previously accused the EU of taking advantage of the US. The EU has a trade surplus of USD 180 bn with the US. Although Trump would be unlikely to start an all-out trade war with the EU, his election would see continued uncertainty due to trade tensions.
  • A close-run election result could lead to contested results and legal challenges. Such a scenario may spark further unrest and instances of violence in major cities. Although such uncertainty would be unlikely to immediately carry over into trade or logistics, it could potentially delay the transition of power on 20 January and contribute to regulatory uncertainty.

Coronavirus

Coronavirus outbreaks will recur periodically until a reliable vaccine is produced and distributed worldwide. Countries will attempt to balance opening the economy with keeping infection rates low. Restrictions on supply chains are likely to be among the last to be lifted.

  • The pandemic has forced many supply chains to adapt. A Business Continuity Institute report found that 73 percent of supply chain organisations interviewed had encountered some detrimental impact to operations. Some port operators have said that they were forced to accelerate the rollout of automated and productivity systems as a result of the pandemic.
  • Many organisations have attempted to increase storage as well as diversify and shorten sourcing due to the pandemic. Post-coronavirus supply chains may require a continued emphasis on resilience. Growing customer demand for shorter delivery windows may act as a further incentive for increased storage.

Civil Unrest

A rise in social unrest triggered by the coronavirus pandemic poses a long-term threat of uncertainty for supply chains.

  • The pandemic has sparked demonstrations globally. Many countries have seen protests over support for medical workers, coronavirus-related restrictions and government policies. Although such demonstrations are likely to continue, they are not expected to directly affect logistics operations.
  • Higher levels of unemployment may mean that there are fewer strikes from workers in employment. However, unemployed protesters and dismissals from struggling logistics companies may prompt targeted strikes and demonstrations.
  • There is a long-term risk that countries with weakened economies—particularly those reliant on tourism—could see protest movements overturn governments.  The coronavirus pandemic has severely affected economies worldwide. The World Bank forecasts a contraction of global GDP by 5.2 percent in 2020 while the IMF has said that the global economy would contract by 4.4 percent this year.  Grievances over government handling of the pandemic and poor economic conditions could trigger major anti-government movements.

Gulf trade deals with Israel

Israel, Bahrain and the UAE are preparing to agree major trade agreements as barriers to business are lowered following the normalisation of ties between the countries in September.

  • Israeli officials have estimated that annual trade could increase to as much as USD 4 bn in total. Although much of the trade will be in the medical and security fields, it may also see increased trade of Asian goods through Dubai to Israel. Israel has said that it is looking to upgrade port facilities at Ashdod and Haifa in anticipation of increased trade.
  • The normalisation agreement may see other gulf countries normalise relations with Israel, which could see further shifts in Gulf trade volumes in the coming months. However, it is unlikely there will be any Gulf Cooperation Council-wide agreement in the near term, amid a continued dispute between Qatar and other Gulf states.

Our Intelligence specialists provide corporate intelligence and geopolitical risk analysis to multinational corporations and governments worldwide. Our aim is to help our clients navigate the complex and uncertain global, 24/7 digital world, enabling them to understand and manage their risk exposure and ensure operational resilience. Contact us to discuss how we can help: riskanalysis@pgitl.com

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