Daily Management Review

Prospect Of No Deal Brexit Makes UK Supermarkets Scramble To Secure Food Stocks


02/19/2019




Prospect Of No Deal Brexit Makes UK Supermarkets Scramble To Secure Food Stocks
If there are no specific trade terms between the United Kingdom and the European Union before their divorce next month, there can be less variety, price increase and shortages of fresh food in the country according to officials of the food industry in the country. 
 
Supermarkets are stockpiling and trying to set alternative routes of sourcing and experimenting with new routes to avoid the anticipated logjam at the borders even as the date for the onset of Brexit - March 29, 2019, is approaching. The supermarkets however say that the obstacles for them are virtually insurmountable. 
 
“You can’t stockpile fresh produce, you haven’t got any space and it wouldn’t be fresh,” said Tim Steiner, head of online supermarket pioneer Ocado.
 
Such warning include discussions and debates of a possible rationing of food and they are part of a rising voice of cumulative concerns over the increasing uncertainty of a deal or a no deal Brexit which is impacting business in a country that was once considered to be the seed of Western economic and political stability.
 
It was almost two decades ago during the time when there was raging protests of fuel resulting in panic buying when there was a shortage of food in Britain. At that point in time, some of the supermarkets were forced to ration essential food such as milk and bread and others on fears that stocks that they had would dry up within days.
 
Currently, through the UK is better prepared compared to the days of the fuel protests in 2000, according to executives within the food chain, the potential disruption is likely to by much larger and the shortage could last much longer than 2000 because the supply chain is expected to be impacted. 
 
Anywhere between one and eight extra weeks’ supply is being asked by the retail and catering customers of the members of the Federation of Wholesale Distributorsm said the head of the body, James Bielby. However, the issue is with storage of large supplies because the industry has been accustomed to the concept of “just in time” for its supply chain which had reduced the need for large storage facilities as the food received were fresh. But stockpiling food – especially perishable ones, requires large and appropriate storage facilities for keep them fresh.
 
Planning for contingency has been made more complicated because of the severe competition and the low margin s in the British supermarket sector. Over the years, storage capacities of supermarkets have been reduced in order to bring down working capital needs, said James Walton, chief economist at IGD which works with the industry to supply chain improvement.
 
Whatever storage facilities that are currently available are all full. “So surplus space within stores is being used and containers are in carparks,” he said.
 
Supplies would not last long, said Mike Coupe, the boss of Britain’s second biggest supermarket Sainsbury’s. “We don’t have the capacity and neither does the country to stockpile more than probably a few days’ worth,” he said in January, echoing the supermarket’s warning to then-Prime Minister Tony Blair in 2000 during the fuel crisis.
 
Almost half of the food that is consumed by Britain is imported and while some of its is imported through air freight, most of the imported food stuff is brought in on lorries through Dover, which is the main gateway to Europe for the country.
 
In case there is no trade deal over Brexit with the EU, the UK would have to go back to the World Trade Organization rules of importing and exporting would be applicable and tariffs would have to be paid along with time consuming processes of checking of goods and paperwork, which are currently not needed. This would result in huge time-lag at the border and severely disrupt the supply chain of the ‘just in time’ system of followed by the supermarkets.
 
(Source:www.wallstreetreporter.com)






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