NEWS

>> Transpacific - port coverage from April 1st.more.

>> Are direct services becoming less attractive for shipping lines?. more.

>> What happens to the small ships post Panama Canal expansion?. more.

>> Maersk to acquire Hamburg-Sud and reinforce its presence on the Latin America routes. more.

>>£0.5 trillion of trade passes through UK ports. More.

>> The future of rail freight and private investment. More.

>> The Northern Freight and Logistics report. More. 

>> Oxford Cambridge Expressway Study. More.

>> The potential impact of Brexit on trade. More.

>> India - the impact of shipping lines’ consolidation and the cabotage rule change. More.

>> Iran – changes in maritime services post-sanctions. more.

>> 'India: The only way is up' say MDST in an article published by Lloyds List. More.

>> Hanjin’s collapse - A wake-up call to the industry? More.

>> Peak season 2016: could the seemingly more rational shipping lines restore stability to the market?. More.

>> Panama Canal Expansion: the major announcements so far have been made by the CKYHE Alliance and G6 Alliance: each have indicated the upsizing of some of their vessels on the services passing through the Panama Canal as shown in MDS Transmodal's analysis. More.

>> CMA-CGM’s acquisition of Neptune Orient Lines and Cosco’s merger with China Shipping Container Line (CSCL), prompted the need for a few changes in the current capacity-sharing agreements amongst the shipping lines. More.

>> MDST has been appointed by Transport for the North (TfN), in partnership with York Aviation and Regeneris Consulting, to carry out a review of international passenger connectivity in the North of England. More.

>> Chris Rowland, Managing Director of MDST, presented the draft conclusions from the Transport for the North (TfN) Freight & Logistics Strategy at the Freight in the City Conference in Manchester on 3 March 2016. More.

>> With 22 maritime services, Iran is expected to see an increase of around 250% in the capacity of container shipping passing through its ports in spring 2016, as shipping lines seek to benefit from the removal of sanctions. More.

>> MDST Chairman, Mike Garratt, wrote to the editor of RAIL magazine in March about the future of rail freight in Great Britain. More.

>> MDST has examined the evidence for Chinese ‘dumping’ of steel on the global and UK markets using its World Cargo Database, which allows it to monitor world trade by both volume and value and for detailed commodities. More.

>> East Asia export box trade sees growth of 1.7% in 2015, says MDST in an article published by Lloyds List. More.

>> The UK Department for Transport (DfT) has published road traffic forecasts which used MDST’s GB Freight Model (GBFM) to develop forecasts to 2040 for HGV traffic on the British road network. More.

>> Ports should be at the centre of distribution chains says MDST. More.

>> Based on its analysis of Eurostat port statistics and its own World Cargo Database, MDS Transmodal has concluded that ports handled 640 million tonnes in 2014, a market share of 40%. More.

Search Our Website

BREXIT

The potential impact of Brexit on trade

There remains significant uncertainty about whether Brexit is likely to lead to a ‘soft Brexit’, with continuing access to the Single Market and membership of the EU Customs Area, or ‘hard Brexit’ which would involve the re-introduction of customs controls and could lead to reciprocal tariffs being introduced by the UK and the EU27…or whether the UK Government will be able to negotiate some kind of bespoke arrangement. This article considers some of the historic trends in UK trade and the potential impact of a ‘hard Brexit’ on UK ports. 

Most economic forecasters have suggested that Brexit will lead to a lower rate of growth for the UK economy in the short term and this has been confirmed by the Office of Budget Responsibility in its forecasts for the UK economy which were published in parallel with the Chancellor’s Autumn Statement on 23 November.  However, the impact of Brexit on the wider economy may not have such a significant impact on port throughputs because almost 80% of the UK economy is related to services, while ports are only engaged in handling imports and exports of physical goods.  Furthermore, it is the dominant flow of unitised goods (imports) which is important from the point of view of the ports industry as the containers and trailers involved will return to collect more imports in any case - whether loaded or empty.

A more interesting question is whether the UK will expand its trade with deep-sea partners - concentrating more cargo on the deep-water ports - at the expense of trade with European partners. A survey of retailers by Barclays in August suggested that sourcing from non-EU countries may grow in popularity, perhaps due to uncertainty around tariffs and trading agreements with the EU.

To begin to explore such issues we have examined how the UK economy has behaved over the last 20 years in terms of the value of goods traded in and out of the UK.  Real GDP in dollar terms has grown by around 54% between 1996 and 2015, years in which the £:$ exchange rate was very similar (£1=$1.56$ in 1996 and £1 = $1.53 in 2015). Over that same time period the value of goods imported into the UK rose by only 37%, showing how the UK economy overall has benefited from the process of globalisation.

In order to analyse these trades, we have adjusted the value of goods traded globally by the real value of US dollars and examined the trade of the UK against the rest of the EU plus Norway and Switzerland in terms of who they trade with and what they trade in.

Figure 1: UK imports from EU and non-EU markets, €US million, 2015 prices Source: MDS Transmodal, World Cargo Database July 2016

Figure 1 shows that since 1997, changes in the value of UK imports from EU and non-EU countries have tracked each other quite closely, implying that other EU countries have generally been able to keep pace with the competitiveness of non-EU sources of imports into the UK market.

Figure 2: UK exports to EU and non-EU markets, €US million, 2015 prices Source: MDS Transmodal, World Cargo Database July 2016

However, the same cannot be said for UK exports (Figure 2), where there has been a sharp drop in the gap between exports to EU and non-EU markets, implying that the UK has become markedly less competitive in exporting to EU markets and has been forced to seek markets further afield.  The real value of UK exports to the rest of the EU was just 2% up from 1996 to 2015, a similar performance to France (+6%) and Italy (+11%) but far lower than for the EU as a whole, which achieved growth in exports of 49% over the period.  Germany achieved export growth to other EU states of 46%, while Poland’s exports to the rest of the EU grew by 383%.  The real value of UK exports to the rest of the world grew much more strongly at +32%, but that was still less than the 43% growth for the EU as a whole and the 83% growth by Germany.

The conclusion must be that UK manufacturing and extractive industries became increasingly uncompetitive between 1996 and 2007 when compared with the rest of Europe.  Since 2007 the position appears to have stabilised, with the real dollar value of EU exports to other EU countries falling by 19% up to 2015; over the same period exports from the UK fell only marginally more at 22%, largely as a result of a strengthening dollar.

In the longer term the available evidence is not encouraging for the UK economy as a whole. The analysis in Table 3 below by leading commodity groups shows that the UK lost market share against its peers (i.e. other EU members) both within the Single Market and to non-EU markets between 1996 and 2015. Even in the case of the export of road vehicles, which is generally regarded as being a major success story, the UK’s share of all intra-European export sales grew by just 1% since 1996 to reach 14% in 2015. Overall, the UK’s share of EU exports to non-EU countries has fallen from 11% of the total in 1996 to 10% in 2015; the UK’s share of EU exports to the European Union has fallen from 9% in 1996 to 7% in 2015.

Table 3: UK market share of exports by commodity groups relative to other EU Member States

Destination

SITC at 2-digit level

1996

2007

2015

Non EU

Road Vehicles

13%

11%

14%

Power Generating Machinery

25%

23%

24%

Medicinal/Pharmaceutical Products 

17%

14%

8%

General Industrial Machinery

12%

8%

8%

Miscellaneous Manufactures 

20%

16%

13%

Instruments - Scientific, Etc.

21%

15%

13%

Electrical Machinery 

14%

7%

7%

Other Transport Equipment

5%

5%

9%

Petroleum & Products

28%

18%

10%

Organic Chemicals 

15%

11%

13%

Specialised Machinery 

11%

8%

7%

Beverages  

31%

24%

18%

Coin Other Than Gold

26%

23%

25%

Non Ferrous Metals

16%

17%

20%

Other Chemicals 

21%

11%

10%

Gold, Non-Monetary 

77%

25%

6%

Metal Manufactures - Other

13%

9%

8%

Telecom & Recording Equipment

16%

8%

10%

Iron & Steel

13%

7%

9%

Essential Oils/Cleansing/Toilet 

16%

10%

8%

Ores & Scrap

20%

19%

22%

Office Machines & Adp

34%

10%

10%

Textiles & Made-Up Articles

10%

7%

7%

Mineral Manufactures 

16%

13%

4%

Live Animals 

2%

10%

17%

Non EU Total

 

11%

11%

10%

EU

Gold, Non-Monetary 

16%

13%

51%

Road Vehicles

8%

6%

5%

Petroleum & Products

18%

16%

11%

Medicinal/Pharmaceutical Products 

13%

8%

7%

Miscellaneous Manufactures 

12%

9%

8%

Other Transport Equipment

3%

3%

14%

Electrical Machinery 

12%

6%

4%

General Industrial Machinery

8%

6%

5%

Power Generating Machinery

14%

10%

8%

Clothing & Accessories

7%

6%

8%

Organic Chemicals 

10%

9%

6%

Instruments - Scientific, Etc.

13%

7%

8%

Telecom & Recording Equipment

17%

6%

4%

Essential Oils/Cleansing/Toilet 

14%

11%

9%

Office Machines & Adp

20%

8%

5%

Other Chemicals 

10%

8%

8%

Specialised Machinery 

9%

7%

6%

Gas  

15%

10%

9%

Non Ferrous Metals

8%

6%

5%

Metal Manufactures - Other

7%

5%

4%

Iron & Steel

8%

5%

4%

Beverages  

14%

12%

11%

Mineral Manufactures 

17%

11%

6%

Textiles & Made-Up Articles

6%

6%

5%

Paper & Paperboard

5%

4%

3%

EU Total

 

9%

7%

7%

Grand Total

 

10%

8%

8%

Source: MDS Transmodal, World Cargo Database July 2016

In real dollar terms, UK imports of goods between 1996 and 2015 grew by 38% while exports grew by 14%. Repeating this analysis for the other leading EU economies and for Eastern Europe as a whole demonstrates that while Germany has retained its market shares, France’s share has also fallen while Eastern European shares have grown strongly. Tables 4 and 5 below summarise these results.  Exports from Eastern Europe to other EU countries have grown by 2.8% p.a. over the 19 year period and fallen by 3.0% p.a. from the UK. To the rest of the world, Eastern European exports have grown by 15.2% p.a. while UK exports have grown by only 0.8% p.a.

Table 4: Growth rate in trade in goods 1996-2015 (real US dollars, 2015)

 

Exports

Imports

To other EU members

To other countries

Total

From other EU members

From other countries

Total

All EU

49%

42%

47%

49%

46%

48%

Eastern Europe

477%

328%

354%

232%

171%

214%

France

6%

38%

17%

26%

42%

30%

Germany

46%

83%

58%

47%

21%

38%

UK

2%

32%

14%

42%

31%

38%

Source: MDS Transmodal, World Cargo Database July 2016

Table 5: Change in market share relative to other EU Member States, 1996-2015

 

Exports

Imports

To other EU members

To other countries

Total

From other EU members

From other countries

Total

All EU

 

 

 

 

 

 

Eastern Europe

+2.8%

+15.2%

+7.1%

+6.8%

+3.8%

+5.8%

France

-3.5%

-0.3%

-2.3%

-2.1%

-0.3%

-1.5%

Germany

-0.6%

5.7%

+1.7%

-0.4%

-3.5%

-1.4%

UK

-3.0%

-0.8%

-2.2%

-0.5%

-1.6%

-0.9%

Source: MDS Transmodal, World Cargo Database July 2016

There has been a clear loss of competitiveness on the part of the UK as an exporter compared to the rest of the EU.  This is dramatically the case in goods such as electrical equipment.  Not only has there been a severe loss of market share on the part of all EU countries (in the face of Far East competition), the UK has lost a great deal of its share of what remains.

What does all this mean for the ports industry?

Firstly, the UK’s poor performance in terms of exports is probably irrelevant in the short term.  The UK exports little that is not transported in a container or a trailer except for scrap metal and bulk chemicals.  If the UK economy does recover its competitiveness in manufacturing, these goods can be delivered using otherwise empty containers that have been used to import manufactured goods.

In the longer term, however, the UK economy’s ability to grow and thereby continue to expand its demand for imports will depend upon continuing growth in the service sector in general and financial services in particular. This will be the key to continuing growth in consumer demand for unitised traffic and for steel, forest products and other construction materials. Other EU Member States have been losing market share in global markets and the UK’s position outside of the EU is likely to reduce Europe’s competitiveness for the UK consumer and construction market.  This means that the UK is increasingly likely to expand the proportion of the goods it receives from deep-sea non-EU sources and this is likely to mean a shift of traffic to the UK’s deepwater ports.

‘Hard Brexit’ will also allow the re-emergence of freezones at these deep water ports.  This would allow goods to be imported tariff free, value can then be added to these goods through assembly or processing, and they can then potentially be re-exported to the European Union.  However, in order to develop successful free zones, the UK’s deep water ports will almost certainly require more space to exploit the opportunities available.