The weakening pound and Ferry Tickets.

As the UK, the European Union and indeed the World come to terms with the news of Brexit the financial and economic markets had been holding their collective breath in anticipation of a cataclysmic currency crash for the Pound.

Pre- poll predictions had seen the £ gain strength driven by an anticipated Remain win. As the count commenced the world currency markets downgraded the value of Sterling, particularly against the US Dollar ($). Against the Euro the Pound's value slipped from a pre-vote high of £1.3 to a mid-poll count of £1.2.

As the London markets opened once the Leave vote had been confirmed a further fall was anticipated, however Sterling seems to have settled at or above circa £1.2 against the Euro.

What does this mean to the UK courier and haulier business?

In the medium and long term we are all waiting to see what the future holds. In the short term, the hope is that it will be business as usual. The stabilisation of Sterling against the Euro and the fact that the predicted move to exchange parity hasn’t happened so far is indeed a blessing. Had there been a more dramatic fall or even had parity occurred then couriers and hauliers would have been left with a situation where an increase in the cost of ferry tickets would have been inevitable. This would have particularly applied where ferry tickets are charged in Euros but where the service is invoiced in British Pounds, thus diminishing competitiveness of UK couriers and hauliers across a pan-European logistics market.

Thankfully the anticipated currency crash has not happened and thereby all parties involved in providing transport and logistics services may breathe a collective sigh of relief that at this early stage the currency fall has not been greater. Importantly the competitive nature of the market appears to have survived the first shockwave.

Increase costs of fuel and increased cost of ferries

A major factor to establishing a “ferry rate” is the cost of fuel. The cost of the ship, length of journey, efficiency of the ship and engines along with other factors also play a part. This is no different to calculating the cost of covering a load for a haulier or courier. Size and weight of the load, length of journey, which vehicle, single man versus double man, overnight costs etc., with a major factor being cost of fuel.

Since Feb 2016 the general cost of a barrel of oil has increased and we are seeing this at the petrol pumps today. In February is was possible to purchase diesel for sub £0.90per litre. Importantly oil is traded in US Dollars ($) and when the news of Brexit hit the market, we immediately witnessed the weakening of £ Pound Sterling. This is unfortunately bad news for UK hauliers and couriers as fuel prices are likely to increase further as Sterling falls in value. In addition, bunker fuel costs will also inevitably rise which will have a knock-on effect on ferry costs in the future.

In summary, increasing oil prices and decreasing Sterling will put upward pressure on Ferry prices. But the good news is that at today's $50 per barrel, this is still much cheaper than in Jan 2011 when oil was pushing $130 dollars per barrel !

04 July 2016

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