The scale of stock shortages in the run up to Christmas 2021, as a result of supply chain issues including Brexit and Covid-19, is laid bare in a new report from the Office for National Statistics.
The ONS Stock and Supply Chain Issues in the UK, Q1 2028 to Q4 2021 report shows that while retailers stocked up ahead of Christmas 2020, stocks fell short a year later, ahead of Christmas 2021.
In the third quarter of 2020, retailers and brands stocked up for Christmas by adding £2.3bn in stock, compared to the previous quarter. The figures are drawn from the ONS’ Quarterly Stocks Survey.
But a year later, says the ONS report, retailers did not stock up to the same extent, adding goods worth £380m during the third quarter. “Quarter 3 would usually be a strong quarter for retailers as they begin to increase stock for the busy winter and Christmas period coming in Quarter 4 (Oct to Dec),” says the report. “However, this was not the case in 2021.” In the fourth, Christmas, quarter of 2021, stock levels were £1.2bn lower than the previous quarter.
Lack of stock was particularly noticeable, says the ONS, in non-specialist stores that were deemed non-essential retailers during Covid-19 lockdowns and restrictions. “Changing consumer shopping habits has contributed towards this decline, with the increasing use of online shopping replacing traditional purchases at high street stores,” the report says.
The report also a shows previous deep lack of stock in the second quarter (April-June) of 2020 – when retailers were affected by the first lockdown, which ran from the end of March to mid-June. Stock then was £1.4bn lower than the previous quarter.
From Brexit to Covid-19: the factors behind supply chain issues
The report suggests that factors including EU exit, the pandemic, and lorry driver shortages lie behind stock shortages. The data suggests that higher stocks were built in the run up to Christmas 2020, after Covid-19 had hit the UK but before new trading arrangements with the EU were introduced from January 2021. The fact that a year later stocks were much lower and then fell sharply ahead of Christmas suggests a clear effect from the new trading relationship, which introduced tariffs for the first time and also meant that lorry drivers from the EU were not as easily able to take jobs in the UK. It is also likely that the effects of Covid-19 had mounted over time.
“Over recent years, the EU exit, coronavirus (COVID-19) pandemic, higher energy and commodity prices, and events such as the blockage of the Suez Canal have presented businesses with significant challenges when acquiring and maintaining their stock,” the report says. “As a result of these challenges, the UK has experienced increased business uncertainty, supply chain issues across a variety of materials and products arising from worldwide shortages, and rising inflation.”
The new report, which investigates the construction and manufacturing sector as well as retail, also looks at the level of comments from its stock survey about supply chain issues. It finds that while there was a rise in comments about supply chains in the first quarter of 2019 – before the UK was originally due to leave the EU – stockpiling was subsequently put on hold, with the new EU Exit date then set at December 31 2020.
“The uptick in comments mentioning supply chain issues over the last three quarters indicates that businesses are continuing to struggle,” says the ONS Stock and Supply Chain Issues report. “The comments also show that this is a result of the current economic conditions, the UK’s exit from the EU customs union and single market, and other issues such as the coronavirus (Covid-19) pandemic and general supply chain issues.” Other contributing factors during 2020 and 2021 have included the Suez Canal crisis, full berths at shipping ports, HGV driver shortages and shipping container price increases. Comments on the EU Exit started to drop off in the fourth quarter of 2020, says the report, “as businesses have begun to adapt to the new economic conditions associated with leaving the EU.”
Commenting, David Jinks, head of consumer research at ParcelHero, says: “This week’s ONS report has laid bare the problems manufacturers and retailers had in maintaining stock levels during Brexit and the pandemic and reveals that they are continuing to experience difficulties.
Jinks says that at a time when many iconic British brands are no longer made in the UK, these supply chain issues may prompt a return to manufacturing in the UK. He cites Booho’s opening of a new factory in Leicester and Ted Baker’s Made in Britain range.
He says: “The trade body Made UK says manufacturing is returning to Britain from across the world. 40% of reshoring is returning from China, over 30% from Eastern Europe and almost 20% is returning from India. It believes we are on the cusp of a fourth industrial revolution that could result in reduced labour content. This would mean the reshoring of low value items to the UK.
“Encouragingly, despite all these supply chain problems, Britain is still the ninth largest manufacturing country in the world, producing £183bn of products and employing 2.5m people. That is a good base to build on. ParcelHero believes Britain’s logistics and delivery companies will soon need to adapt to a growing UK manufacturing base. War in Ukraine can only accelerate this.”
