UK logistics performance: some good news from the World Bank

Date : 02 May 2019

Interesting data is found in the World Bank report Connecting To Compete - 2018 edition - which gives a nation-by-nation view of international logistics performance and how it has changed over time.

This study is based on responses to a complex online survey, carried out over September 2017 to February 2018 using a sample of 869 logistics professionals from 108 countries.

Note that the survey covers a wide range of physical goods, mainly manufactures; there may be differences in performance in specific categories - especially food and drink, which raises special challenges.

In overall logistics performance, the UK is ranked 9th out of 167 nations, scoring 3.99 out of a possible 5.00.  This is comparable with other major European trading nations (differences between top-rankings are small).

UK effectiveness in Tracking & Tracing and Timeliness was especially high, ranked in 4th and 5th places respectively.

Customs and International Shipments scored slightly less well, ranked 11th and 13th, but these were still very respectable, versus global peers.

 

Some of this high score may be attributable to EU membership – the bulk of UK goods imports are from other EU nations and this is rendered fairly simple due to the EU customs union, regulatory alignment etc.

It would be rather surprising, in fact, if intra-EU logistics were not super-smooth, given that free movement of good and people is a key EU concept, with much effort expended to achieve it.

However, EU membership cannot be the only reason, since other EU nations fall further down the World Bank rankings – Ireland lies in 29th place in 2018, with an overall score of 3.51. Timeliness is a particular weakness.

Speculatively, one reason for the difference may be geographical – GB is close to mainland Europe, with the option of a short sea connection or rail connection via the Channel Tunnel *.

Ireland, by contrast, has longer sea crossings to GB and to Europe (with more risk of disruption due to bad weather) and no rail options at all. This may account for differences in the Timeliness score at least.

Import administration is slick

The UK’s administration for import administration seems strong, by global standards and at least comparable with key trading partners in Europe.

Only around 2% of UK import shipments receive physical inspection, with half of these being inspected more than once.

Clearance time through customs – the time between submitting documents and receiving clearance - is one day without physical inspection or two days for the small number that are inspected.

Again, the UK’s quick, light-touch border procedures may be due in part to EU membership, although investment and effort by both government and businesses also contribute.

What might Brexit mean for UK logistics

The good performance of UK logistics leaves businesses in a strong position to deal with disruptive events, but it is hard to see how leaving the EU could be beneficial, from a logistics viewpoint. 

The UK’s trading relationship with EU countries is already optimal and, therefore, any alternative arrangement is likely to be less satisfactory.

In 2017, the latest year for which we have data, UK imported 40% of all food and drink consumed 1 . Of the food imported, 71% (by value) came from the EU and 29% from elsewhere 2.

High reliance on food, coupled with just-in-time delivery models makes the UK food supply chain vulnerable to “friction” as goods cross the border.

The UK government continues to focus on passing the controversial EU Withdrawal Bill, which would implement the deal agreed with the EU, allowing a transition period and paving the way for a full trade deal.

Passing the Withdrawal Bill is proving difficult however and there is still a possibility of Brexit – now expected within six months – without any beneficial trading arrangements in place and no transition period either.  

If so, there is the potential for much greater border “friction” (eg: administration, inspections, new IT, general confusion).  Even if limited, this could impact food availability for shoppers and performance of businesses.

Traffic at key points of entry to the UK is very high. The Port Of Dover, for example, saw 2.5m HGV movements in 2018 (both ways), an average of 6,843 HGVs per day 3

Even small individual disruptions – perhaps inspecting 3% of incoming shipments, rather than the current 2% - could create a “cascade” effect, with large queues forming and disruption spreading through supply chains.

The UK government has signalled that it will focus on maintaining “flow” at UK borders post-Brexit and various measures have been announced to support this (eg: Transitional Simplified Procedures) 4.

The UK’s key trading partners in Europe (eg: France, Ireland and the Netherlands) also have high logistics performance and good import admin, by global standards, as shown by the World Bank study.

This gives some confidence that these partners have the capability to cope with goods shipments inbound from the UK, even if Brexit outcomes are unfavourable but, again, Brexit is unlikely to be helpful.

French authorities have been at pains to reassure businesses that they are ready for even “no-deal” Brexit, but this is a key “known unknown” for businesses.

Delay to Brexit gives businesses more time to prepare IT systems … provided that they remain focused on the task and do not allow themselves to be distracted.

Sources and notes:

* Here we describe Great Britain, rather than the UK, since Northern Ireland is not geographically contiguous with Great Britain

(1) Agriculture In The United Kingdom, DEFRA LINK

(2) UK Trade Info, April 2019 LINK

(3) Port of Dover, April 2019

(4) HMRC LINK

James Walton

James Walton

Chief Economist

15 October, London
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