Ongoing talks involving the United Kingdom and the European Union blew past today’s self-imposed deadline as the final day to reach a formal agreement.

According to a published report by The Guardian, teams had been negotiating throughout the day and expect to continue tomorrow (Monday). A UK government spokesperson told the publication: “Talks remain difficult and significant differences remain. We continue to explore every route to a deal that is in line with the fundamental principles we brought into the negotiations.” Further reported was the following:

The failure to meet the European parliament’s deadline means that ministers on the EU council representing the bloc’s capitals may need to “provisionally apply” a deal on 1 January to avoid a no-deal exit until parliament votes later in the month.

If the talks go much deeper into December, however, there may not be time for the EU capitals to translate and scrutinize the agreed text, leaving the UK to exit the transition period without new trade and security arrangements with Brussels.

Brexit Transition

Some in Prime Minister’s Boris Johnson’s cabinet are hinting at a possible “thin” Brexit agreement or the possibility of a side agreements with some individual European countries. Once again, the brinkmanship negotiations could likely extend to the December 31 deadline but that will not alter the challenges that will be faced come the start of 2021.

Earlier this month Supply Chain Matters declared that industry supply chain teams in the affected region have little choice but to prepare for a hard, no-agreement Brexit. That is now more apparent than ever, and the evidence is mounting that the logistical and transportation challenges are already becoming more visible.

British business and trade groups have been actively pleading with Boris Johnson’s government ministers to extend the time that they have to prepare for whatever Brexit agreement is adopted, in-essence calling for a negotiated grace period for which new measures can go into effect.

As we have noted in our Brexit updates, the fallback for a no-agreement Brexit is a fall back to commercial rules established by the World Trade Organization, which imply tariffs on categories of goods and customs controls at borders.

One of the most sensitive areas of concerns related to customs controls is that of goods departing or entering Northern Ireland which is part of the UK. Goods that transverse the UK into Northern Ireland that become deemed for at-risk for moving into the Republic of Ireland would likely have to incur tariffs when crossing the Irish Sea to avoid a hard border in Ireland.

 

Warning Signs Increase

The truck queuing lines for each of the transit ports to and from the UK are already undergoing long lines as supply chains tend to stockpiling, safety stock and other means require to buffer what is expected to be a significant logistics disruption.

Bloomberg report last week that Europe’s largest trucker, Girteka Logistics, has warned that it could turn away deliveries to the UK if Brexit does trigger chaos at respective borders. An executive at the logistics firm warned of expected queues that could stretch as far as 50 kilometers (31 miles). The UK government itself has informed businesses to brace for disruption, and a worst-case scenario that could result in a queue of 7000 trucks at the Port of Dover. Europe’s Road Haulage Association, a trucking industry lobby group indicates that a number of EU haulers are not inclined to take bookings for UK deliveries in January because the costs of delay and adle time will not be worth the value of their transport contracts.

UK retailers are reportedly building-up contingency inventories in anticipation of multi-day disruptions and subsequent higher prices for food and other consumer products.

 

Industry Impacts

The CEO of commercial aircraft manufacturer Airbus indicated in conference held in Montreal earlier last week that the aerospace giant has no plans to close down UK factories supplying aircraft wings and other structural components if a hard Brexit occurs in two weeks, but again warned that without a formal trade deal with the EU the plane maker’s future investment plans regarding the UK could be threatened.

A spokesperson for German automaker BMW warned last week that the reversion to WTO tariffs would lead to reduced volumes and production within the UK.

 

Further Concern

A troubling new concern was mentioned in our prior COVID-19 coronavirus industry supply chain news capsule. A new, potentially more contagious strain of the virus has reportedly been discovered in the UK and the city of London and most of southern England have been placed in lockdowns scheduled to occur this coming week. Concerns related to this potential new strain has already prompted other EU countries such as Germany, France and Italy to restrict inbound flights from Britain.  Such concerns could possibly increase over the coming 11 days and that might affect the ability or tendency of truckers to want to enter the UK or be restricted to exit the UK without added testing, which adds to the delay factors.

 

 

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