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Logistics firms
Boxed in
The return of borders poses a challenge to the soaring parcel-delivery business
During the day, Leipzig's airport is quiet. It is at night that the airfield comes to life. Next to the runway a yellow warehouse serves as the global sorting hub for DHL, A delivery firm owned by Deutsche Post of Germany. A huge extension, which opened in October, means it can sort 150,000 parcels each hour, says Ken Allen, DHL' CEO. It was built as business soared. But the express-delivery industry faces a new challenge: the return of trade barriers due to the protectionist bent of Donald Trump and because of Brexit.
The slower-moving shipping and air-cargo business has long been in the doldrums as a result of slow overall growth in trade in recent years. Yet the rise of cross-border e-commerce has still meant booming business for express-delivery firms. On January 31st UPS revealed record revenues for the fourth quarter of 2016; FedEX and DHL are expected to report similarly buoyant results next month. Since 2008 half of the increase in express-delivery volumes has come from shoppers buying items online from another country.
Falling trade barriers have greatly helped them. When DHL and FedEX were getting going, in the 1970s, there was little demand for international express deliveries. Packages often got stuck in customs for weeks and were heavily taxed. The expansion of free-trade areas, lower tariffs and the internet brought years of growth. But after Mr Trump's threats to raise tariffs on goods from China and Mexico, together with the indication last month from Theresa May, Britain's prime minister, that the country will leave the EU's customs union there are widespread fears that the favourable tailwinds enjoyed by the industry for decades are gone. “It's all a real nightmare,” groans David Jinks of ParcelHero, a British parcel broker which works with DHL, FedEx and UPS.
Start with Brexit. More physical border checks between Britain and Europe would do little direct damage. Most packages arriving in Britain have already been checked for drugs and dangerous items. Goods from outside the EU go through customs 95% of the time without any inspection or delay.
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