(Bloomberg) — A scarcity of warehouse space because of Christmas demand and the pandemic is putting the U.K. at risk of shortages of some food products as it prepares to leave the European Union’s single market.
With five weeks to go before the end of the Brexit transition period, large manufacturers and industry groups are warning that the capacity of the food supply chain is at its peak and can’t withstand any further shocks.
Unilever, the maker of Ben & Jerry’s ice cream and Hellmann’s Mayonnaise, said it is building up stock of key lines but “warehouses are absolutely full.” Like rival Nestle, the maker of Kit Kats and Nescafe coffee, maintaining supply of finished products and ingredients is now the priority as talks between Britain and the EU on a trade deal remain deadlocked. Yet that’s “with stock building more difficult at this busy time of year,” Nestle said.
“The flexibility we had in March to respond to Covid-19 demands to move stock around doesn’t exist at this time of year,” Unilever said by email. “We need governments on both sides to do whatever is needed to keep the ports and roads open for smooth and consistent supply routes.”
There have been numerous warnings about potential Brexit disruption from companies and even U.K. ministers, such as lines of trucks on the highway regardless of whether there’s a trade deal or not. The trouble is that the latest contingency planning couldn’t come at a worse time as Christmas goods take up storage space.
People in the food industry say it’s likely there could be some shortages of key brands and ingredients made in the EU, which supplies Britain with everything from tinned tomatoes and olives to wine and baby food in foil pouches. Even with an accord, some food prices are also likely to rise.
More companies are trying to recruit extra logistics workers to ensure ports can cope with increased demand for unloading and storing supplies. Others, including Unilever, have been beefing up U.K.-based manufacturing.
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The Food and Drink Federation is concerned about the ability of businesses to stockpile at a time when “we don’t have an abundant amount of food safe warehouses,” said Dominic Goudie, head of international trade at the organization. Britain “won’t run out of food,” but there could be sporadic shortages of certain products and brands, he said.
More than four years after the U.K. voted to leave the borderless market it joined in 1973, the country has yet to agree the terms of its future relationship with its biggest trading partner. The delays have left companies struggling to address the uncertainty.
For example, it’s hard to know how to stock supplies of the right packaging when labeling requirements post-Brexit are still not clear, Goudie said. That will particularly hit goods supplied to Northern Ireland, which will still be bound by the single market rules when the transition period ends, he said.
“Stockpiling of food packaging is a critical component of any supply chain,” Goudie said. “But we still have technical questions that need to be answered about what exactly you must put on the packaging.”
Business groups say failing to reach a new deal would be disastrous for the economy, whose parlous state because of the virus was laid bare by Chancellor of the Exchequer Rishi Sunak this week.
Goudie pointed to the current congestion of containers at the English port of Felixstowe as a worrying snapshot of what could lie ahead for food deliveries post Brexit. Some of his federation’s members have had goods rerouted to other ports in the U.K. and on the continent.
“They are now struggling to find road haulers to transport the products they need and are facing huge added costs to do this,” Goudie said. “Felixstowe is now directly impeding their ability to be ready for Jan. 1.”
Food and drink manufacturers, though, have shown their ability to adapt as consumer demand patterns changed with the coronavirus pandemic. The U.K. also produces 55% of the food it consumes, according to government figures, and ministers are working with the industry to ensure people have the supplies they need.
“The UK has a highly resilient food supply chain,” a government spokesperson said in a statement. “As a responsible government we continue to make extensive preparations to ensure we are ready for a range of scenarios at the end of the year, including mitigating the impact on border flows.”
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Spanish foods importer Brindisa has placed orders for an extra 350,000 pounds ($467,000) of its best-selling items, including tinned tuna and olive oil, said Heath Blackford, managing director of its wholesale division. The shipments will arrive in mid-December and should guard against potential disruptions in January.
Recruitment company Manpower Group Inc., meanwhile, is fielding inquiries from companies looking for staff to work in every part of their supply chains.
Demand for stock analysts, warehouse pickers and packers, and forklift truck and crane drivers to take containers off ships in ports is “through the roof,” said Jason Greaves, Manpower’s brand leader and operations director. “In every area there are skills shortages,” he said. “Who would have ever thought that Brexit, the pandemic and Christmas would hit us all at once?”
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