Freight Firms Cashing In on Brexit Bake In Higher Shipping Rates

(Bloomberg) -- The post-Brexit spike in freight rates across the English Channel is expected to be partly permanent.

The cost of moving full truckloads from the U.K. to France last week was 39% above the third-quarter average, according to high-frequency data from the global logistics platform Transporeon. The figures were boosted by the resurgence in demand for transportation last week, to 78% of the average for the same period after a lull over the New Year.

Many firms stockpiled ahead of Britain leaving the European Union’s single market and customs union and avoided port congestion in the aftermath. As those inventories dissipate, traffic is returning and higher freight rates may become the norm.

“There is a likelihood that we will be seeing higher rates for lanes into and out of the U.K. into the EU as a result of Brexit,” Stephan Sieber, chief executive officer of Transporeon, said. “Carriers, which normally operate on very tight margins, are reacting to market dynamics.”

Despite higher prices, friction at the border prompted more shipping firms to reject previously agreed contracts to take cargo from Britain to continental Europe last week, leaving the rejection rate still double the third-quarter average. That means companies trying to move goods were forced to pay the increased spot rate.

While a rate spike in the first few weeks of the year is typical, given that’s when drivers usually take vacations and demand picks up, another explanation was uncertainty caused by “statements that customs authorities feel not everybody is well-prepared,” Sieber said.

The U.K.’s Brexit minister Michael Gove has warned that “significant disruption” is now more likely as trade flows increase and the French government ramps up the enforcement of new checks.

The shipping firm DFDS warned last week that many vehicles were being held up or denied access at Dover, Dunkirk and Calais due to “incorrect paperwork being presented at check-in.”

Duncan Buchanan, policy director at the Road Haulage Association, agreed that freight rates would “never fall completely because there’s a permanent added cost per shipment of the significant extra bureaucracy.”