No-deal Brexit threatens Christmas chaos: UK retailers

Sainsbury's chief executive officer Mike Coupe, noting that late October is when the company revs up its supply chains for Halloween, Black Friday and Christmas, said: "A very hard-edged Brexit would be very disruptive to our business and potentially
Sainsbury's chief executive officer Mike Coupe, noting that late October is when the company revs up its supply chains for Halloween, Black Friday and Christmas, said: "A very hard-edged Brexit would be very disruptive to our business and potentially disruptive to people's Christmases."PHOTO: REUTERS

LONDON • Christmas is nearly half a year away, but British retailers are already fretting about the damage a no-deal Brexit on Oct 31 would do to the year's busiest shopping season.

Firms like J Sainsbury and Tesco, Britain's two largest grocers, fill their warehouses with toys, TV sets and other festive stock in the autumn months, and any turmoil around Britain's departure from the European Union could impede shipments and hurt sales.

"You couldn't pick a worse date," said Mr Mike Coupe, Sainsbury's chief executive officer, noting that late October is when the company revs up its supply chains for Halloween, Black Friday and Christmas. "A very hard-edged Brexit would be very disruptive to our business and potentially disruptive to people's Christmases."

Clashing with holiday preparations is just one way a no-deal departure at the end of October threatens to cause even more upheaval than the original deadline in March would have.

Both of the Conservative Party candidates vying to become Britain's next prime minister - Mr Boris Johnson and Mr Jeremy Hunt - have said they support pursuing a no-deal split if Britain cannot ink an improved Brexit agreement with the EU.

Logistically, warehouses filling up with seasonal goods leave little room for extra Brexit-related contingency stock, said Tesco CEO Dave Lewis. Tesco built up stores of non-perishable products in the run-up to the initial March deadline for Brexit. Doing that again will be harder in October, he said.

"All of the network will be full of things getting ready for Christmas," Mr Lewis told the BBC. "If there's a problem at the border, if there's a problem with tariffs, there could be interruptions."

A lack of warehouse space is not the only issue. There is also a shortage of available labour, equipment and management systems to provide companies with a one-stop solution for their stockpiling, said Mr Peter Ward, CEO of the UK Warehousing Association, which has more than 700 members with sites at 1,300 locations. Availability of such logistical services is near capacity, he said.

Another risk is an unwillingness by firms to get ready. Cash-strapped small companies that spent resources preparing for a no-deal exit in March put themselves at a competitive disadvantage, which may dissuade them from doing it again, said Mr Mike Cherry, national chairman of the Federation of Small Businesses, which has 170,000 members.

Then there is Brexit fatigue. Though many firms are better informed about the risks of a no-deal departure than before, weariness with the drawn-out saga makes it hard to keep staff focused on contingency planning, said Mr Brian Connell, a supply chain consultant at KPMG who advises large companies on Brexit preparations.

"It's difficult to maintain that level of energy and commitment," he said. "People who ramped down their no-deal planning at the end of March are struggling to get it going again."

Calls from Mr Johnson and Mr Hunt for Britain to step up no-deal preparations prompt anger from business owners like Mr Guy Blaskey, founder of Pooch & Mutt, a maker of pet foods. His firm stockpiled £400,000 (S$682,500) worth of products before the earlier Brexit deadline, and needed to take out a loan to cover the costs. He said he is considering taking out another loan to cover further stockpiling expenses.

"Spending on Brexit preparations means you're not spending money on employing people, marketing, growing your company," he said. "I feel like the details of how this affects companies are being totally ignored by politicians."

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on July 06, 2019, with the headline 'No-deal Brexit threatens Christmas chaos: UK retailers'. Print Edition | Subscribe