This December many retailers are not just stocking up for Christmas, but for Brexit. Supermarkets are stockpiling longer life foods as they prepare for shortages of imported foods, while ferry companies and ports both report carrying high volumes of freight as part of a wider effort by retailers and others to have stock available for customers to buy in January and beyond.
Tesco is among those that is building reserves of ahead of January 1 2021, when the way the UK trades with the European Union will change as the transition period following its January 2020 departure from the trading bloc comes to an end. Twenty days out, it is still not clear how the two will trade in the future – and yesterday UK prime minister Boris Johnson warned businesses and consumers to prepare for no deal being reached by the deadline of Sunday. It was his second warning of this eventuality this autumn.
Tesco chairman John Allan said this week that the supermarket is stockpiling non-fresh food as it prepares for potential shortages. But he warned that in the event of a no deal Brexit, import taxes would push up the price of French brie by as much as 40%, while food bills could rise by an average of 5%. In the meantime, there is expected to be disruption to supplies. He told Bloomberg: “We are trying to ensure that we have stockpiled as much as we can of long-life products either in our own warehouses or with our suppliers.”
Andrew Opie, director of food and sustainability at the BRC, says“Retailers have spent huge amounts of time and money preparing ahead of January 1 - increasing the stock of tins, toilet rolls and other longer life products as part of their planning for a no-deal Brexit, so there will be sufficient supply of essential products. They have also been building new customs and VAT processes, working with suppliers to ease logistics, and more – but with so many unknowns, some disruption for consumers and businesses is inevitable."
Ferry operator DFDS today said that it had carried 17% more freight in November as its customers built stocks ahead of Brexit. It said volumes were particularly strong on routes to the UK, up by 25%. Routes between the Netherlands and the UK were particularly business, while English Channel routes were also higher than usual as a result of Brexit stockpiling.
More than 9,000 lorries a day – carrying the equivalent of 20,000 twenty-foot equivalent (TEU) containers – are currently going through Dover’s ferry port. The Port of Dover says, in a statement this month that it is well-used to dealing with stockpiling and uncertainty. “We did it three times last year in the run up to Brexit without issue and are quietly and confidently doing it again in the run up to the end of transition January 2021, to ensure supermarket shelves stay full for Christmas and factories up and down the nation stay busy.”
The British Retail Consortium (BRC) has previously said that half of all food eaten in the UK is imported, as is 30% of food sold in supermarkets. Of that, 79% is from the EU. In the event of a no-deal Brexit, 85% of food imported from the EU would attract tariffs of more than 5% under the schedule the UK government published in May. It cites as examples, tariffs that would add 48% on the price of beef mince, 16% to cucumbers, and 57% to cheddar cheese. The average tariff on food imported from the EU would be more than 20%, according to the BRC, while the average tariff on clothing and textile imports would be 12%.
The BRC’s Opie today adds: "With just weeks to go, it is alarming that there has still been no deal agreed with the EU, putting customers in line for a £3bn tariff bombshell. Currently, four-fifths of UK food imports come from the EU and without a tariff-free deal, supermarkets and their customers face over £3bn in tariffs from 2021. Furthermore, retailers will need time to implement the aspects of any deal, and the ongoing uncertainty surrounding the new checks and red tape that will apply from January 1 will create disruption in the supply of many goods.
He adds: “Retailers are doing everything they can in time for January 1, but no amount of preparation for retailers can entirely prevent disruption to food and other essential goods that come from or through the EU. With negotiations entering the 11th hour, protecting UK and EU consumers from billions in tariffs must be the top priority.”
He says that in January, 85% of the UK’s tomatoes are imported from the EU, compared to 30% in June, and 90% of lettuces (5% in June).
In the meantime, there are reports of shipping rates increasing sharply as companies look to avoid sending goods to UK ports, such as Felixstowe, that are becoming increasingly congested.
Alan Joseph, operations director of The Cotswold Company told the BBC: “What the lines are trying to do is to dissuade people sending stuff to the UK,” citing a price of $8,000 to transport a 40ft container from Asia to the UK. "At the end of September, market rates were less than a quarter of that, at $1,700 per unit," he said.
Here’s a link to P&O’s advice on sending freight from the UK to Europe and vice versa, which includes steps that retailers need to take.
Here’s a link to InternetRetailing’s three-part series on the practical steps retailers can take as they prepare for January 1 2021, deal or no deal. Part 1 covers VAT and the all-important EORI numbers.