Updated: Aug 18
While most of the focus of Brexit has been on the impact it has had on trade between the UK and the EU, it has also had a broader knock-on effect on other aspects of global trade. One impact that grabbed the headlines earlier in the year was the knock-on effect on Asia to UK shipping.
Many UK importers faced soaring shipping costs at the end of 2020 into the beginning of 2021, as a variety of different pressures on shipping and freight forwarding came together to create a perfect storm. Brexit was one of these factors, but other issues were also conspiring to drive up costs.
As well as increased demand in the US and a global container shortage, Brexit added another dynamic that would result in increased shipping Asia to UK shipping rates. With staff shortages and backlogs at ports, the situation grew until importers were faced with eye-watering shipping charges.
The Brexit effect
The cost of shipping goods from Asia to UK and northern European ports more than quadrupled from $2,000 in November 2020 to more than $9,000 by January 2021 according to shippers and importers. Experts in global shipping believe that UK importers were dealt a double blow, both by the huge global impact of the coronavirus and the end of the Brexit transition period.
While Covid-19 suddenly and dramatically disrupted global shipping supply chains, the end of the Brexit transition period caused a large increase in imports. Many importers were keen to get goods to the UK prior to the introduction of new regulations and customs procedures. A trade deal between the EU and the UK was only agreed at the last minute, leaving a great deal of uncertainty about how trade between the EU and the UK would be conducted. This uncertainty increased the pressure on imports into the UK from the EU as businesses importing non-perishables built up their stock levels.
Congestion at UK ports as a result of Brexit has resulted in a number of international shipping lines cutting the number of direct services from Asia to the UK. Instead, many Asian goods are now being transported to Rotterdam and Antwerp, before being shipped into the UK by EU to UK carriers. This adds delays and another set of customs procedures. Space is now at a premium when it comes to shipping goods directly from Asia to UK ports.
While the UK share of the global economy at 2.25% may seem relatively small, a significant increase in demand for shipping in the UK has helped to create a perfect storm with a range of other factors that pushed up costs.
Delays at ports caused by Brexit have also been a drag on global shipping times, creating backlogs that have, in turn, increased demand. Brexit may not be the principal factor in the steep rise in prices but it has played a part, giving logistics firms and import businesses an extra set of challenges to deal with.
A range of factors
Unfortunately, high shipping costs have continued between Asia, the UK and the rest of northern Europe since the end of the UK’s Brexit transition period. Soaring demand, prompted in no small part by the online shopping boom during the Covid-19 pandemic, a global shortage of containers, backlogged and saturated ports, as well as too few ships and dock workers, have all played their part.
A squeeze on transportation capacity across every freight path as well as renewed Covid outbreaks in Asian export hubs have also exacerbated the problem. Distance is also a factor. The further goods have to travel, the sharper the overall impact. Costs have risen steeply on longer shipping routes. Shipping from Shanghai to Rotterdam for instance is 67% more expensive than to the US West Coast.
Another recent factor has been the temporary blocking of the Suez Canal. The six day blockage had a dramatic impact on global shipping. 12% of world shipping travels through the canal, and the delays caused are still being felt.
Are prices back to normal?
While many people expected a short-term Brexit related spike in shipping costs it was hoped that prices would eventually begin to stabilise. This hasn’t been the case, with Brexit related issues continuing to be a factor in the range of issues sustaining the cost increase.
With difficulties across the shipping industry and delays at ports continuing in large part due to coronavirus, many companies are choosing to store goods in containers in warehouses, again reducing the amount of available shipping containers. Lockdowns and other restrictions have meant that the production of containers has become erratic.
Everyone in the industry is focused on reducing global shipping costs, speeding up shipping and ensuring that global trade can happen effectively as the world leaves lockdown and begins to move to a post-pandemic world. There are a complex set of challenges ahead which, taken together, are likely to keep costs higher for some time, particularly if demand increases as lockdowns end.
With this in mind it’s important to work with a trusted and experienced freight forwarding company. For up to date advice about Asia to UK shipping call 01744 416 999 or use our contact form today.