Brexit - and Cabotage Rules

Posted 22/07/2016

Ever wondered why there are ever greater numbers of foreign registered lorries on our roads? 

Clearly one reason is the ever increasing trade we conduct with Europe and these vehicles are bringing in imported goods from all over the EU. 

Another major factor, however, was the introduction in 2009 of EU Regulation (CE) n°1072/2009. Its aim was to liberalise the European transport market and achieve:

  • Another step on the road to a genuinely single market in all goods and services across the EU
  • A reduction in the percentage of “empty running” by vehicles on EU roads, and thereby reduce the costs of transport, reduce the total number of vehicle journeys and ultimately lower pollution.

The legislation scrapped the requirement for drivers to return to their home countries with an unladen vehicle. All drivers/vehicles can now do up to three ‘cabotages’ in a period of seven days after their initial international delivery. 

Because driver wages can represent 40 – 45% of the costs of vehicle journey in Western Europe, and other costs (fuel, vehicle purchase and maintenance, insurance etc.) are relatively the same wherever you are located in the EU there has been a natural tendency for organisations, who are seeking cost improvement, to manage their supply chains in ways that maximize the amount of journeys undertaken by divers from eastern Europe, under cabotage rules. Such drivers are generally lower waged and often operate under different or differently applied regulations. 

There is now growing concern in countries in the “old” EU that the misuse of cabotage rules, and the scale of the difference between wages, social laws and fiscal laws across the EU is resulting in “social dumping”.  The French government in particular has been active in calling for an “update of cabotage rules in road freight” They are being resisted by countries in the East of the EU and by the Commission itself who believe more rigorous application of regulations and a continuing decline in wage differentials across the EU will be enough to deal with current concerns. 

The concerns being voiced are two fold – first that the dumping is making western European hauliers in general less financially viable, and second its effect of depressing wage rates for drivers in western Europe is exacerbating the already serious problem of recruiting drivers into the industry and further heightening the possibility of a shortage of drivers in the next 10 years. 

So what might be the impacts of the United Kingdom’s decision to exit the EU have on this issue.  Essentially they are 3 fold: 

  1. We impose border controls and the flow of eastern European immigrants to the UK is halted or greatly reduced. At present substantial numbers of such immigrants become drivers of heavy goods vehicles (HGV’s). As this source of recruits dries up driver shortages are likely to worsen and driver wages will rise to attract the recruits needed.
  2. The £ weakens as the UK economy goes through the shock of Brexit (it has already fallen circa 8% against the Euro) and drivers from other countries currently in the UK opt to return home as the value of their UK wage v their home country falls – results in a driver shortage and ultimately higher driver wages.
  3. We opt out of the EU cabotage regulations as part of our Brexit deal and as a result many internal UK journeys currently undertaken by foreign vehicles / drivers will have to be done by UK based drivers / vehicles - almost certainly in the short term at least leading to driver and vehicle shortages, and increased driver pay and haulage rates in general.

Or potentially none of these things will happen and we retain access to the EU single market (including cabotage rules) and impose / achieve limited restriction of immigration from EU countries – in which case driver wage rates are still likely to rise as the French and others continue to press for “update of cabotage rules in road freight". 

Interesting times we live in!

Tagged by topic: Logistics , News

  by John Matthews

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