As the Government continues to open up non-essential services as the coronavirus pandemic eases, businesses will, from 4 July, be able to book HGVs, buses and trailers in for MOTs. The timings published for when vehicles need to be tested are:
- MOT originally due in March – vehicle must now pass MOT by 30 September
- MOT originally due in April – vehicle must now pass MOT by 31 October
- MOT originally due in May – vehicle must now pass MOT by 31 August
- MOT originally due in June - vehicle must now pass MOT by 30 September
- MOT originally due in July – vehicle must now pass MOT by 31 October
- MOT originally due in August – vehicle must now pass MOT by 31 November
The six-month extension granted to LCVs and other vehicles remains unchanged for now. All road fund license fees will still need to be paid when due. More details here.
Shipping costs stable
Container rates have remained stable over the past week on most Asia-to-Europe routes. With Europe coming out of lockdown, retail demand is increasing, which is good news for carriers. Shipping lines continue to manage capacity and ships are leaving Asian ports will full loads. Rates have now increased to around $885 per TEU, 1.3% up on last week. This is 24% higher than in the same week of last year, but reflects the significant reduction in containerised freight volumes.
Shipping alliances’ views on how the recovery will pan out vary. Both the 2M Alliance and The Alliance have reduced third-quarter capacity on Asia-to-Europe routes by 20-25%. Ocean Alliance has only taken out 4% of capacity so far. Still, schedules are being reviewed and amended regularly, so these plans may all change.
There are also longer-term issues to consider. As businesses diversify supply chains, particularly in recognition of over-reliance on China, ports may need to invest to keep up with changing global demand. Drewry, the maritime research and consultancy firm, suggests many businesses will now look beyond China. South-east Asia is well-placed to benefit, with some of the production infrastructure already in place and potentially lower labour costs. South-east Asian port terminals may therefore need significant upgrade work.
No V-shaped recovery for airlines
The International Air Transport Association (IATA) warns the airline industry not to expect a quick recovery from the effects of the coronavirus pandemic. IATA wants governments across the world to protect airlines and their supply chains, estimating the industry will lose $84bn in 2020.
Financial support is crucial, IATA argues. Scheduled flights on many routes are now being reinstated, but the overall numbers remain significantly down. IATA’s research suggests travellers are cautious. Only 45% of those who travel regularly intend to return to flying over the next few months, with 36% expecting to wait at least six months. The research also warns:
- overall bookings are down 82% in June compared to a year ago
- long-haul forward bookings for the first week of November 2020 are 59% below normal levels. Historically, around 14% of airline tickets have been sold by 22 weeks in advance of travel. Current bookings for 1-7 November represent just 5% of tickets sold in the same week of 2019
- passengers are booking closer to the time of travel. Bookings for travel 20 or more days in the future accounted for 29% of bookings in May 2020, down from 49% in 2019. Some 41% of bookings made in May 2020 were for travel within three days, compared to 18% last year
The impact has been dramatic. On Monday 15 June, just 11 scheduled flights took off from Gatwick Airport, the UK’s second biggest airport. On the same day of last year, the figure was 435.
Scheduled flight numbers have increased significantly in recent weeks, but Official Airline Guide (OAG) data shows last week saw the smallest rise in capacity since the start of the crisis. This suggests airlines are waiting to see what July brings, and hoping for further clarity about lockdowns around the world, before making any more decisions about rescheduling flights.
For UK businesses that rely on air freight to move goods, the combination of these factors means air freight rates are high, and are likely to remain so for some time.
While the UK Government has announced a three-stage move to new customs requirements for imports following the end of the Brexit transition period on 31 December, it looks likely that the European Union will impose full customs requirements straight away. The EU’s ambassador to the UK said last week that the bloc currently has no plans to follow the UK in giving shippers a six-month transition period to prepare their businesses.
This means shippers exporting to the EU may need to complete customs declarations and other documentation from 1 January. This would represent a significant increase in administration and there are concerns we may see delays and disruption at the border, particularly if the UK and the EU do not reach a deal on their future trading arrangements.
There’s also widespread concern that companies will not have time to prepare for the new arrangements, even with the phased transition period.
One positive development is the Government’s announcement of £50m of support to help businesses with recruitment, training and the implementation of new processes and systems to handle customs declarations. Ministers are also keen to find ways to remove barriers for shippers. New rules on financial liabilities, for example, may help businesses as they increase client numbers.
Applications for the new funding open in July. More details here.
How Santander can help
All of the issues covered in this week’s update have the potential to impact our clients’ international supply chains. We work with a number of logistics partners with specialisms in particular markets or sectors. We’re especially keen to hear from any clients facing supply chain difficulties. Our partners are happy to provide impartial advice on a range of potential solutions that might help you overcome such challenges.