Whilst it may seem too early to be talking about Christmas for the average consumer, for certain businesses in the logistics sector, planning for Christmas 2019 began around three years ago when they booked their much-needed warehouse space.
With the UK and EU yet to reach an agreement on their future trading relationship post-Brexit, the possibility of leaving without a deal in place is very real. And in the event of a No Deal Brexit, we expect to see significant delays at the border due to increased checks. As such, supermarkets, manufacturers and pharmaceutical companies are all being pressured to stockpile goods in order to limit potential shortages. But with Black Friday and Christmas just around the corner from 31 October 2019 – the date when the UK is due to leave the EU – warehouses do not have the level of availability required. Put simply by Pauline Bastidon, Head of Global & European Policy at FTA, ‘there is no more room.’
In the buildup to the first deadline for the UK to leave the EU – 29 March 2019 – a report from January 2019 noted that three-quarters of UK warehouse owners said their spaces were already full to capacity. However, with the space they were using then now pre-booked for Christmas, companies that previously stockpiled goods such as car parts, toilet rolls and dried food may now be unable to do so. And if companies are unable to stockpile, congestion at the borders will increase even further, as businesses will need to continue importing and exporting as usual. This will directly affect more time- sensitive goods which cannot be stockpiled and pre-prepared, such as fresh food or medication, thus impacting overall shortages.
Certain industries, such as refrigerated food storage, are also facing additional complications as they require specialist warehouses, for which space is very limited. Car manufacturers are also among those which face significant challenges, given that they would need huge volumes of spaces in order to stockpile. In a bid to minimise potential disruption from a no-deal Brexit, companies such as BMW and PSA brought forward their annual summer factory shutdowns to April 2019. While employees were still working, no new cars were being made, reducing the impact of a potential shortage of imported parts. Despite the March 2019 Brexit deadline date being moved, shutdowns are planned months ahead and are difficult to reschedule; therefore, they had no option but to go ahead. Having already closed down production once, manufacturers will struggle to justify another costly shut down to accommodate the new October deadline, as it could lead to shortages of vehicles and delays to production.
For businesses that have already stockpiled materials, economic implications are beginning to come to the fore. Not only are additional warehouse space costs already mounting up, reducing operating profits, but there is a financial risk to making future sales forecasts further ahead than usual. Having already made preparations themselves and taken the financial risks once already, businesses are now having to repeat the process, as well as being faced with the additional challenge of the lack of warehouse space.
Warehousing has been facing a multitude of challenges in recent years. With the government prioritising housebuilding, new available land has been used for residential development, leaving warehousing construction lagging behind. Combined with the accelerated rise of e-commerce, the increased demand for warehousing space has dramatically reduced available warehousing capacity. With the ‘inner M25’ area vacancy rate now at just 2.2%, logistics companies are looking for alternative solutions. However, it takes five to seven years for new facilities to enter the system and there is simply not enough time. Other options companies are looking into include chartering their own planes and ferries to mitigate delays.
The logistics industry is willing to adopt and adapt to new practices, however, it would help if the sector knew what it is preparing for in advance. With such a shortage of warehouse space at a critical time for the UK economy, it is crucial that companies can prepare as much as possible, with the correct formalities and paperwork in place to keep fluid movement at the border to minimise delays, and therefore shortages of goods.
Efficient logistics is vital to keep Britain trading, directly having an impact on more than seven million people employed in the making, selling and moving of goods. With Brexit, new technology and other disruptive forces driving change in the way goods move across borders and through the supply chain, logistics has never been more important to UK plc. A champion and challenger, FTA speaks to Government with one voice on behalf of the whole sector, with members from the road, rail, sea and air industries, as well as the buyers of freight services such as retailers and manufacturers.
Pauline Bastidon, Head of Global & European Policy, FTA