With the prospect of crashing out of the EU looming, the U.K. is battening down the hatches.
Companies are stockpiling food, medicine and car parts — but they’re running out of space to store it all.
Tesco, Britain’s largest supermarket, has rented an emergency supply of refrigerated units to mitigate any chaos in the event of a disorderly Brexit. Marks & Spencer has begun stockpiling non-perishable goods. Pharmaceutical giants, meanwhile, have secured additional U.K. warehouse space for medicines and vaccines that require cold storage. And automakers like BMW are frantically looking to store components.
In all, warehouse space is already 75 percent full, according to data from the UK Warehousing Association, whose members have roughly 9.3 million square meters of space nationwide.
“We are facing a ‘perfect storm’ in the warehousing and logistics industry, with little speculative build in the pipeline [and] urban development land earmarked for residential but not for the warehousing required to fulfill rising consumer demand,” UKWA said in a statement. In the last quarter of 2018, 85 percent of UKWA’s members received Brexit-related inquiries.
“There is a little bit of a worry that if you talk about it too much, you might create the problem you are trying to avoid” — Retail industry official
Whether it’s supermarkets, drugmakers or car manufacturers, it’s hard to find a segment of British industry that is not undergoing a costly process of contingency planning, especially now that U.K. lawmakers have rejected Prime Minister Theresa May’s Brexit deal.
“Retailers are planning ahead to meet consumer demand in all eventualities. Where it is feasible, given the nature of the product and available storage space, they are doing the prudent thing and increasing some stock,” said Andrew Opie, director of food and sustainability at the British Retail Consortium, whose members include the Sainsbury’s, Asda and Tesco supermarket chains.
Although the stockpiling of dry goods such as tinned tuna, baked beans and pasta is possible, Opie said perishable produce such as fruit, vegetables, fresh fish and meat “cannot be stored for any prolonged length of time.”
Marks & Spencer declined to specify its stockpiling plans, and Asda did not reply to questions. Tesco declined to comment but pointed to comments made by its chief executive, Dave Lewis, on January 10, when he told reporters Tesco had “sat down with each individual supplier partner and decided what, if any, is the need for stock and where that is best to most appropriately [be] kept and maintained.”
Shoppers walk past a Marks & Spencer shop on Oxford Street in central London | Tolga Akmen/AFP via Getty Images
As the March 29 deadline approaches and May looks to Brussels to make changes to the so-called Irish backstop — which is designed as a fail-safe mechanism to avoid the need for a hard border on the island in all circumstances — companies like Gate Gourmet, which supplies 20 airlines at 10 airports in the U.K., have begun stockpiling frozen entrées, pizzas, dried snacks and sandwiches at warehouses in Peterborough and London to ensure passengers will stay fed, a company spokesperson said.
Gate Gourmet produces most of its meals in Germany and Spain and fears any holdup at the British border could disrupt its business model.
Two industry officials in the retail sector, who spoke on the condition of anonymity, said supermarkets are extremely reluctant to talk about finer details or the scale of their contingency planning for fear of sparking a bout of panic buying. Worries among the public about possible shortages have prompted the creation of Brexit “prepper” Facebook groups, while manufacturer Emergency Food Storage is selling so-called Brexit Boxes for £295, containing freeze-dried meals, a water filter and a fire starter.
“There is a little bit of a worry that if you talk about it too much, you might create the problem you are trying to avoid,” one of the industry officials said, adding that some supermarkets have studied which products would be hit hardest by tariffs in the event of a disorderly Brexit and have begun prioritizing those items.
Many retailers are also frustrated about having to invest more in storage facilities when a Brexit deal could still be negotiated before March 29, the two officials said, noting that the cost of warehouse space has risen markedly of late as fears of a no-deal rise.
Very little can be done to stockpile fresh produce though. Strawberries, for example, can be irradiated — a technique already deployed in Belgium — and apples can be stored in a dark, cool room with high levels of carbon dioxide as a way of keeping the fruit fresh for months on end. But the vast majority of fresh items like cheese and meat will simply perish if held up at the border due to customs controls.
“We are looking for additional [warehouse] space but in the end, it’s not possible” — Stephan Freismuth, BMW customs manager
“The whole point in ‘just in time delivery’ is that you don’t have to put aside cash to store goods,” said Neil McMillan, director of political affairs and trade at EuroCommerce, a lobby organization for the retail sector. “The scale of movement across the Channel is just immense. If fresh veg is stuck for even a couple of days, it’s off by the time it comes across.”
There are similar limitations for automakers.
BMW Customs Manager Stephan Freismuth said that stockpiling could be achieved for a matter of days. Anything longer would require building “the highest building in the world.”
“We are looking for additional [warehouse] space but in the end, it’s not possible. We are producing ‘just in time,’ and just in sequence,” Freismuth said, noting that BMW in the U.K. imports about €2 billion worth of car parts from the EU every year, or double the amount it sources from inside the country.
Carmakers such as Nissan, Toyota and Honda face similar problems as hundreds of trucks carry components into the U.K. on a daily basis to snap into just-in-time supply chains at plants across the country.
In the pharmaceutical sector, U.K. Health Secretary Matt Hancock is working to ensure Britain is prepared for a no-deal Brexit. According to the Association of the British Pharmaceutical Industry, AstraZeneca has increased the number of finished medicines available to pharmacies and hospitals in both the U.K. and EU by 20 percent as a response to the risks of no deal.
British Health Secretary Matt Hancock | Dan Kitwood/Getty Images
It has also spent £40 million preparing for a no-deal Brexit, including building labs in Sweden to duplicate product testing.
The French pharmaceutical giant Sanofi has secured additional U.K. warehouse space for medicines and vaccines that require cold storage and is also moving some manufacturing operations from the U.K. to elsewhere on the Continent.
Don’t speak out
Aside from being worried about the possibility of a panic if they disclose too much about their plans, companies are also limited in what they can say publicly. The British government has used non-disclosure agreements to prevent organizations and businesses from revealing information about Brexit-related stockpiling.
Over the last few weeks, Labour MP Rushanara Ali has questioned the government over its use of non-disclosure agreements, which prevent organizations and businesses from revealing any information related to contingency plans drawn up by government departments in no-deal Brexit preparations.
Following her inquiries, the government admitted the Department of Health and Social Care has used 26 non-disclosure agreements to restrict what businesses and organizations could say publicly.
Nissan’s production plant in Sunderland, England | Christopher Furlong/Getty Images
“It is unacceptable that the government continues to pursue a policy of silencing businesses and industry from speaking out about the disastrous implications of a no-deal Brexit,” she told POLITICO.
“By effectively ‘gagging’ these organizations, these secretive agreements are preventing essential information from being shared, are undermining transparency, and are hampering businesses’ ability to speak out.”
When asked by POLITICO, a U.K. health department spokesperson said that signing non-disclosure agreements allows the department to “talk to the industry in confidence prior to making public statements and issuing advice. This means that when we go out to the whole industry we can be confident that any requests of them are clear, appropriate and deliverable.
“As part of any standard contract, in government or the private sector, we use these clauses to protect the commercial interests of government and its suppliers in a reasonable way.”
Helen Collis contributed reporting.