BREXIT – How will Article 50 affect the Transport Sector?

The UK government has yet to decide exactly when the UK will part company with the EU and the basis upon which they do so (and whether or not a 'so-called deal' is actually done) is still a long way down the road.

Of course, while politicians debate the pros and cons of a second referendum (including a Scottish independence referendum, it would seem) and pundits talk about the effect of Brexit on the markets, commercial vehicle operators have to get on with running their businesses.

The three key pinch points for operators are exactly the same today as they were five years ago, namely (1) regulation, (2) cost base and margins, and (3) access to labour.

Regulation:

Lawyers and commentators may be interested in regulation - will leaving the EU result in changes to the rules of the road that will actually affect what operators and drivers are allowed to do? - and the pre-Brexit vote took as one of its major themes the effect on the UK of endless EU Regulation being foisted upon UK citizens. But, in reality, meaningful changes in regulation post-Brexit are highly unlikely. There is no political appetite to relax the drivers' hours rules and in any event transport will not be top of the Prime Minister's list of priorities.

Mrs. May has promised to serve formal notice of Brexit by the end of this month (March), but the momentous nature of the decision, both politically and legally has made the route to that action rather tortuous and it is still not clear when the UK government will be able to "press the button", although the vote on 13th March has clarified that Mrs. May now has the powers to do so.

So if regulation is unlikely to be affected (at least in the next five years or so) what should operators be focusing upon?

Cost Base & Margins

Operators are going to feel the real impact of Brexit in their pockets. The buying power of the pound, the cost of diesel (and the degree to which that cost is predictable and capable of being planned for) and the margins that are available.

On the PSV side, operators reliant upon government funding (especially for home to school transport, and the endemic short term re-tendering required of them by Councils that are themselves having their budgets squeezed) are facing cut-throat competition and the options to diversify and/or find ways to make this work commercially viable are priorities that are much closer to home and need immediate attention.

If a devalued sterling cuts an operator's profits to the bone either because orders for services shrink or because the prices operators can charge come under a continuing suffocating pressure or both, it will be small consolation to be told that an already complex and demanding regulatory regime is unlikely to be tightened.

Access to Labour (and transitional Arrangements)

Whatever the political pressures that the Brexit vote imposes on the free movement of labour, Brexit means 'control'. The (unhelpfully simplistic) assumption peddled in the media is that those in favour of border control seek fewer immigrants every year.

But control means exactly what it says, and those businesses which need non-UK workers to make up their numbers will be able to get them, since there is no logical rationale for refusing entry to migrants who have valuable skills and jobs to go to, and no reason to think that the rules which currently apply to non-UK residents who live outside the EU (or something very like them) will not be extended.

That said, anyone already established in the UK pre-Brexit will likely receive additional protection in any event, so operators that already rely upon EU residents to make up their numbers can be confident that they are not going to face a forced exodus, and empty driving seats.

What is Our View?

We do not expect Brexit to result in an overhaul of the core set of rules that regulate commercial road transport (HGV and PSV).

What is likely is that the free movement of labour will be curbed, if not fully controlled. Foreign EU nationals that have established jobs (especially PAYE) with UK operators will likely receive a measure of protection, and in turn their UK employers will have an advantage, so now is the time to be thinking about whether the recruitment of EU nationals makes sense, before the rules change.

It follows that for any operators who rely upon non-UK resident EU drivers now is the perfect time to be reviewing the systems and records in place to ensure that such drivers are properly employed, properly inducted and properly supervised including making sure that all the necessary driving licence and Driver CPC checks have been carried out and that appropriate records of these checks are held on file.

Looking more widely at the economic horizon, the challenges for UK commercial vehicle operators remains largely unchanged in the sense that the core risks are a loss of commercial viability and threats to the operator's licences upon which commercial vehicle businesses depend.

Adopting a maritime analogy, a sailor cannot control the weather (albeit that an eye on forecasting makes perfect sense and sometimes one can chose not to put to sea), but the seaworthiness of the boat is a different matter altogether. A compliance operation, properly run, with good systems that are accurately recorded, remains a lasting protection against everything that threatens if vehicles are unsafe and their drivers poorly supervised.

If you would like to talk through ways in which you can try to future-proof your business ahead of Article 50, then call us now on 01279 818280 or click here to send an email.