Food shippers warn of Brexit no-deal supply threat

Major UK retailers claim it is impossible to mitigate all the risks to supply chains and they fear significant disruption if Britain crashes out of EU with no agreement.

A long list of major UK food shippers have warned about the supply chain challenges for retailers and the consequences for millions of UK consumers of leaving the European Union without a deal at the end of March.

A letter to the UK parliament from members of the British Retail Consortium, signed by the chief executives of major national supermarkets including Sainsbury’s, Asda, Marks & Spencer, the Co-op and Waitrose, warned that although the companies “have been working closely with our suppliers on contingency plans, it is not possible to mitigate all the risks to our supply chains and we fear significant disruption in the short term as a result if there is no Brexit deal”.

Sharing some practical examples, they highlighted: “Our supply chains are closely linked to Europe – nearly one third of the food we eat in the UK comes from the EU. In March the situation is more acute as UK produce is out of season: 90% of our lettuces, 80% of our tomatoes and 70% of our soft fruit is sourced from the EU at that time of year. As this produce is fresh and perishable, it needs to be moved quickly from farms to our stores.

“This complex, ‘just in time’ supply chain will be significantly disrupted in the event of no deal. Even if the UK government does not undertake checks on products at the border, there will still be major disruption at Calais as the French government has said it will enforce sanitary and customs checks on exports from the EU, which will lead to long delays; Government data suggest freight trade between Calais and Dover may reduce by 87% against current levels as a result.”

For consumers, they said this would reduce the availability and shelf life of many products.

The retailers said they were “also extremely concerned about the impact of tariffs”, noting: “Only around 10% of our food imports, a fraction of the products we sell, is currently subject to tariffs so if the UK were to revert to WTO Most Favoured Nation status, as currently envisaged in the no-deal scenario, it would greatly increase import costs, which could in turn put upward pressure on food prices. The UK could set import tariffs at zero but that would have a devastating impact on our own farmers, a key part of our supply chains.”

The retailers stressed that theirr ability to mitigate these risks was limited, noting: “As prudent businesses, we are stockpiling where possible, but all frozen and chilled storage is already being used and there is very little general warehousing space available in the UK. Even if there were more space it is impossible to stockpile fresh produce, such as salad leaves and fresh fruit.”

The explained that retailers typically store no more than two weeks’ inventory, and it becomes difficult to restock stores if the supply chain is disrupted. “We are also attempting to find alternative supply routes but there are limited options and not enough ferries, so this could only replace a fraction of the current capacity,” the retailers added.

“We are extremely concerned that our customers will be among the first to experience the realities of a no deal Brexit. We anticipate significant risks to maintaining the choice, quality and durability of food that our customers have come to expect in our stores, and there will be inevitable pressure on food prices from higher transport costs, currency devaluation and tariffs.”

The companies urged UK members “to work with your colleagues in Parliament urgently to find a solution that avoids the shock of a no deal Brexit on 29 March and removes these risks for UK consumers”.

Retail analyst GlobalData estimated that food price inflation could rise to about 5.1%, from 2.4% currently, in the case of a no-deal Brexit, confirming that the just-in-time supply chains that UK supermarkets operate mean there is not the specialist infrastructure in place to deal with stockpiling – particularly of fresh goods.

However, the UK Prime Minister’s spokesman claimed ministers were taking measures to minimise the impact of a no-deal Brexit on supermarkets’ suppliers and insisted that food was not going to run out as a result, the Guardian reported.

Source: lloyd´s