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How are Covid-19 and Brexit affecting ports in Wales?

Volumes of trade through major Welsh ferry ports were temporarily reduced by the pandemic. But for some ports, leaving the European Union has had a bigger negative impact as freight companies redirect to avoid the ‘landbridge’ to Europe through the UK.

Ports in Wales have experienced great change over the past 18 months, not only due to Covid-19 but also arising from the UK’s departure from the European Union (EU) at the end of 2020. With data now emerging on how ports have fared during this turbulent period, we can reflect on what needs to happen next.

Surprisingly, Covid-19 appears to have had only a limited short-term impact. While overall freight volumes are down, the situation is better for ports in Wales than for other UK ports due to the variety of cargo handled and a focus on commodity products. Of the seven major ports across Wales, Newport, Cardiff, Port Talbot, Swansea and Milford Haven are particularly associated with bulk products, including oil and gas, timber and steel.

By contrast, Brexit has had a significant impact on ferry ports with links to Ireland, namely Fishguard and Holyhead with their roll-on, roll-off (‘ro-ro’) ferry services, as well as those operated from Pembroke Dock (part of the Milford Haven port area). There was a surge in the run-up to Brexit followed by a significant drop-off. Data suggest volumes are returning, but there remains a need to build confidence that transit through Welsh ports will not bring disruption.

Consequently, there are interesting dynamics in considering the impact of Covid-19 on port volumes, while the links with Ireland have been of extensive interest since the Brexit referendum in 2016.

How did Welsh ports perform during 2020?

Milford Haven is the largest port in Wales and the third largest in the UK, handling 33 million tonnes. Each of the remaining ports handles under seven million tonnes. Figure 1 shows normalised annual port freight volumes through the seven major ports in Wales. Total tonnage across all ports dropped by just 3% in 2020, compared with a UK port average fall of 8%. These changes could be seen as just a continuation of historical trends, but data for 2021 and beyond would be needed to confirm this.

Since the data are for overall volume of freight, they may also disguise changes in the type of goods arriving or leaving these ports as they tend to handle a variety of cargos. The focus on commodity products such as steel and timber found at the start of supply chains may also insulate the ports from short-term changes in end consumer demand. As a comparison, Felixstowe and Southampton saw volume drops of 9% and 17% respectively. These ports are the main entry points for containerised goods in the UK, which are typically consumer products destined for retailers.

Figure 1: Major Welsh ports

Source: BBC News

Figure 2: Freight through major Welsh ports, 2009-20

Source: Department for Transport (2020) Quarterly Port Statistics

While most ports’ activity remained steady or declined slightly in 2020, Holyhead saw 10% growth, representing the eighth year of continuous growth at the port. This trend has been driven by firms exploiting the advantages of its geographical location as an access point to Ireland through the ferry links to Dublin. For example, many retailers use the route to service their stores in Ireland, as sailing times allow loads to be shipped from UK warehouses (or manufacturers) in the evening to be in retail outlets for sale the following morning.

Another area of growth has been what is termed ‘landbridge’ traffic. This is freight from Ireland destined for the EU, which passes through Great Britain in between two sea crossings (the Irish Sea and the English Channel). About 150,000 lorries per year use the landbridge, 85% passing through Welsh ports (Irish Maritime Development Office, 2018). The frequency of sea crossings both to Wales and across the English Channel has made this a trusted, quick and reliable route for deliveries.

Since 1 January 2021, Holyhead port, along with Fishguard and Pembroke Dock for southern Irish Sea crossings, have found themselves on the border between the UK and the EU, and there is evidence showing that these particular ports have been affected both before and after this date.

How has Brexit affected Welsh ferry ports?

Figure 2 shows the port volume by quarter for Holyhead and Fishguard between 2018 and 2020. While there was a slight drop in the second quarter in 2020 due to Covid-19, these ports experienced significant growth in the second half of the year, showing a clear break in previous trends. While the data for Fishguard are less conclusive, anecdotal evidence suggests a spike towards the end of the year.

Figure 3: Quarterly freight volumes through Holyhead and Fishguard

Source: Department for Transport (2020) Quarterly Port Statistics

Data for early 2021 are still emerging, but information provided by Stena Line (Figure 3) shows a significant drop in the number of lorries being handled during the first few months of this year at both Holyhead and Fishguard. While traffic at the former is showing some signs of recovery, freight remains lower than usual on the southern Irish Sea route. This situation was not helped by cancellations from Fishguard during February when Stena redeployed the ferry to allow another vessel to undergo maintenance.

Figure 4: Change in freight units through Holyhead and Fishguard

Source: Stena Line, via How Brexit has changed trade between Britain and Ireland, Sky News

Brexit caused significant uncertainty for supply chains, especially with the Trade and Cooperation Agreement with the EU not being agreed until 24 December 2020, just a week ahead of the UK’s exit from the EU. When faced with any form of uncertainty, supply chains will typically change one of three things: inventory; time; or capacity (Pound et al, 2014). Capacity changes often occur over the longer term, but there is clear evidence of changes in inventory and time being used in the case of Brexit.

Firms will typically use changes in inventory to ensure that supply to their customers continues. With Brexit being a single defined event, the focus was on ensuring that enough stock was available to allow new processes to be adopted and settle in. Therefore, in late 2020, there was clear evidence of stockpiling by firms moving goods into and out of the UK. This surge, coupled with typical seasonal increases ahead of Christmas, not only affected the ports but also the roads, with congestion on the A55 (BBC, 2020).

Yet whenever a firm increases their stock, there then comes a period of time when this is reduced back to a more normal level. This has clearly been happening during the first few months of 2021 and, with Holyhead volumes starting to recover, there is evidence that new ways of working are bedding down and firms are now returning to regular shipments across the Irish Sea.

This ‘boom and bust’ approach is also known as the ‘bullwhip effect’, as variation in customer demand is magnified by each stage of the supply chain (Lee et al, 1997). One of the challenges is that without coordination, this effect can get worse as you move up the supply chain, and potentially separated in time from the initial disruption too. Therefore, the consequences may be felt by some firms for a while yet.

The other approach to greater uncertainty is to increase the time in the supply chain, to give more reliability to arrivals. Here, firms have been switching to direct ferry routes between the Republic of Ireland and the mainland EU instead of the landbridge. This switch started before Brexit, and it was expected that changes of this nature would occur. But the volume of change has been surprising. The port of Rosslare, the main departure point for these ferries to the mainland EU, saw a 45% growth in traffic volumes in January (RTE, 2021). Further, the number of weekly services to the EU has grown from three to 14.

These ferry routes can cost €400 more than using the landbridge while taking a similar amount of time, but they are seen as offering a more predictable arrival by not crossing the UK-EU border twice and therefore avoiding port delays caused by paperwork and customs checks. There is currently little sign of this volume declining, with ferry operator DFDS Seaways recently introducing a fourth vessel on their Rosslare to Dunkirk route to provide eight sailings each way per week (Irish Times, 2021).

How can Irish Sea traffic be attracted back?

This is a key question over the next few months as new ways of working settle down and it becomes clearer how supply chains will be organised. After all, if commuters can find better routings when disruption occurs (see Larcom et al, 2015), so too can supply chains. Although volumes are recovering, there are various actions that will help this to happen. Ultimately, the aim will be to show that using Welsh ports will offer a consistent, reliable transit option for companies, thereby reducing uncertainty.

Given that many choices on the use of Welsh ports are taken by decision-makers outside Wales, there are only limited actions that the Welsh Government can take. Nevertheless, it has implemented a five-point plan to support the ports (Welsh Government, 2021b).

Three of these points relate to improving the information processes around freight movements, where errors with paperwork can lead to unexpected delays at the ports. The remaining two look to provide information and support to companies using the ferry links, ensuring documentation is completed correctly and building confidence in the landbridge.

Ferry operators also need to provide assurance by guaranteeing that crossings continue to be reliable and scheduled at relevant times for freight users. The recent increase in schedules by Stena between Fishguard and Rosslare helps with this, while Irish Ferries are introducing a crossing on the Dover-Calais route to offer logistics firms a ‘one-stop-shop’ for all sea crossings on the landbridge.

It will also be interesting to see how the direct route from the Republic of Ireland to the EU fares in terms of reliability and whether this affects future choice of route. The Irish Sea can be exposed to incoming storms, leading to cancellations. In early March, there were cancellations for two to three days on all direct EU routes from Rosslare while services to Wales were cancelled for one day only (NIFerrySite, 2021). Coupled with the opportunity for more frequent sailings, recovery from weather delays occurs more quickly on the landbridge route, which may affect firms’ choices.

What does the future look like for Welsh ports?

Clearly, Covid-19 and Brexit have brought challenges to Welsh ports, although any immediate impact from the former has been largely offset as services have recovered through the rest of 2020. Brexit has brought more significant challenges, particularly to those ports with ferry services to the Republic of Ireland. Going forward, the Welsh Government will need to take a proactive role in supporting port development, not just for users but the wider communities that they serve. The Wales Transport Strategy offers such an opportunity through focused plans for ports and logistics more widely (Welsh Government, 2021a).

There has been talk about the potential for so-called ‘freeports’ to facilitate future growth (Welsh Affairs Committee, 2020). Freeports contain areas where goods can be held and processed without paying customs, with duties only payable if the goods enter the domestic market. Businesses located there can receive tax reliefs and other benefits.

While freeports can help to bring economic growth, there is a danger that they may just transfer jobs from other areas. There are also concerns about whether there will be impacts on environmental or employment standards because these areas have special regulatory status. It is perhaps telling that the Welsh Government has yet to commit to establishing such a site in Wales, despite eight locations in England being announced.

Another opportunity lies in the cruise market, which has previously brought tourists to ports such as Fishguard and Holyhead. This sector has been particularly affected by Covid-19, not just in terms of cancelled holidays but also wider perception about infection spread within vessels. While operators remain confident that demand will return, there is considerable uncertainty and plans for Welsh ports to capitalise on this market may need to be put on hold.

Regardless, what is clear is that Welsh ports will need to continue to adapt to reflect their changing roles in supply chains and the economy more generally. In doing so, we may then look back on Covid-19 and Brexit as a blip in their history, rather than a turning point.

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Author: Andrew Potter, Cardiff University
Photo of Swansea Marina by Tiia Monto on Wikimedia Commons
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