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18.12.2017Back to Blog

Brexit: EU-citizens free-circulation vs. logistics talent shortage

Pierre Liguori, Director of the supply chain consultancy firm, Tokema International, explains in a series of articles how Brexit could harm trade between the UK and continental Europe, create major supply chain disruptions but also opportunities, and impact the logistics industry in the short and long term.

Immigration was one of the main motivation – with sovereignty – to vote Leave. The British government is therefore committed to implementing more restrictive post-Brexit immigration policies, especially regarding low skilled workers while taking care of the status of around 3 million EU citizens currently working in the UK as part of the Brexit negotiation rounds with the EU.

Several industries like construction, food or logistics have already warned of an existing shortage of resources. In the logistics industry this situation is mainly due to the lack of attractiveness of warehousing jobs: according to a recent report of the UK Commission for Employment and Skills, 9% only of the industry’s existing workforce is under 25 years old, suggesting that something must be done quickly to attract young people to a career in logistics.

At the United Kingdom Warehousing Association’s Annual Parliamentary Lunch, held in October at the House of Lords, UK Warehousing Association (UKWA) CEO, Peter Ward said that the “shortage of labour was a problem for the logistics industry before the referendum and it has been exacerbated by Brexit and the weaker pound which is prompting an exodus of the Eastern European labour on which our sector has relied for some years”.

An increasing problem especially now because logistics is changing. Automation and robotics are becoming a key feature of the warehouse of the future. Customers are expecting higher levels of services at a lower cost. As a result 3PLs are providing more added-value services and operations are likely to become more light industrial assembly production vs. conventional 4-wall operations. Warehousing workforce will be required to be more skilled and more jobs will be created from drivers to warehouse designers, project managers or warehousing technology engineers.

In addition, e-commerce is booming and the emphasis is now on last-mile delivery and delivery networks transformation into more flexible schemes since Amazon started to offer same day – not to say one hour! – delivery. In the Daily Telegraph (28/07/2017) Clipper Logistics CEO Tony Mannix also warned: “of a shortage of staff to work in warehouses amid increasing demand for click and collect shopping services”.

As Peter Ward added: “Also high on the agenda is the shortage of staff in the logistics sector as an aging workforce retires, whilst the weakened pound and uncertainty over EU citizenship conspire to reduce the availability of European labour”. According to PwC, workers from the European Economic Area accounted for 17% of the UK’s warehousing workforce in 2016. Almost 10% of commercial drivers in the UK are from other EU countries. The challenge for the British logistics industry is therefore to bridge the talent gap and to remain cost-competitive towards other countries in Europe that are trying to benefit from Brexit and the expected European supply chain redesigns.

One of the regions usually seen as well located to attract distribution centres to “cover” the British market in the future is the Northern France region (Hauts-de-France). Logistics accounts for 14% of employment in the region but the industry is facing exactly the same kind of issues as the UK: lack of attractiveness especially with the youngest workers, difficulty to find the proper skilled workforce despite an unemployment rate of more than 10% in the region…and much higher costs: the average wage of a warehouse worker accounts for 11.40€ per hour (£10.11) compared to an average wage of £7.50 per hour in the UK but French workers productivity is higher as the legal working time is 35 hours per week. Last but not least employer’s social contributions on salary account for 49% in France vs. 13.8% in the UK!

Attracting EU logistics workforce in the UK is therefore not only a matter of bridging the talent shortage and delivering value to customers in the UK: this is also a key strategic issue for logistics providers to protect and expand their current domestic market shares and profit.

Ensuring that distribution centres remain in the UK means for the government jobs protection, market competitive salaries, logistics infrastructure utilisation and road transportation networks development: keeping and attracting EU logistics workforce is also a matter of sovereignty for the UK.

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