Summary
Fears of supply chains disruption arising from a ‘no-deal’ Brexit has seen food manufacturers and retailers stockpiling supplies to such an extent there is now an acute shortage of cold store space in the UK. This could generate serious problems for ACP exporters of chilled and frozen products which have not already contractually locked in access to cold storage capacity. ACP exporters of chilled or frozen products urgently need to review whether they have contractually secure access to cold storage capacity on route to serving their final customers. If not they will need to intensify their search for what limited cold store capacity remains available across the UK.
According to press reports in mid-November 2018 ‘frozen and chilled food warehouses are fully booked for the next six months’ as ‘retailers and manufacturers rush to stockpile amid growing fears of a no-deal Brexit’. Overseas suppliers who have not already contractually secured cold store space are now being turned away. For example a ‘Danish butter company who wanted to store 11,000 pallets of butter in the UK’ could find no storage space available and was turned away by the cold store company’s contacted.
This needs to be seen in a context where according to Ian Wright, the chief executive of the Food and Drink Federation (FDF) ‘all the arithmetic seems to suggest that it will be impossible for the prime minister to get her deal through (Parliament), so retailers and food manufacturers are continuing with contingency plans’.
According to the Food Storage and Distribution Federation (FSDF), ‘normally temperature-controlled warehouses are at their quietest in the months between Christmas and Easter but the fear of no-deal Brexit means they are now fully reserved in advance from January to April and beyond’. The FSDF accounts for ‘75% of all commercially available frozen and chilled food warehouses in the country’, so the situation of a singular absence of cold storage space would appear to be the dominant situation in the largest part of the cold storage industry.
This problem has arisen as food manufacturers have moved away from just-in-time supply chains. FDF CEO Wright has made it clear that while companies normally bought ingredients as and when required the threat of having their overseas supply chains disrupted by a ‘hard’ Brexit has seen company’s re-engineering their supply chains with companies ‘scrambling round for warehousing now to get their ducks in a row’.
The CEO of the FSDF Shane Brennan maintains the shortage of warehousing space is not a problem which can easily be solved, since a ‘large warehouse that can take 100,000 pallets costs tens of millions in investment and takes three years to build’. Even in the case of smaller facilities, with a 3,000 to 4,000 unit capacity would require an investment of £2-3m investment, with even these taking time to build
| Comment and Analysis
This issue of the shortage of cold store capacity could raise serious problems for ACP exporters of chilled and frozen products which have not already contractually locked in access to cold storage capacity or who do not work with companies who own their own cold storage capacity and have allocated available space to ACP supplies. This problem of a shortage of cold storage space in the UK is not dependent on whether there is a Withdrawal Agreement or a ‘no-deal’ Brexit (for an assessment of the prospects in this regard see companion epamonitoring.net article ‘UK Withdrawal Agreement Concluded At Negotiators’ Level’, 19 November 2018). These effects are already being felt and even under a best case scenario will not be worked out of the supply chain until May 2019 at the earliest. Individual ACP exporters who need access to cold stores as part of their delivery arrangements to final customers in the UK up to May 2019 will need to review the contractual commitments they have already secured and if these contractual commitments are not in place, will urgently need to identify available cold storage facilities which they can use. This is not likely to be an easy task. To put this issue in perspective the Danish butter suppliers’ example cited would require 3 small cold storage units to accommodate planned exports or would take up 11% of the capacity of a larger facility which would take 3 years to build. The problem is that while the ratification of the current draft EU/UK Withdrawal Agreement would usher in an extended transition period, the move away from just-in-time supply chains is likely to become quasi permanent, until such time as a long term EU-UK trade framework is in place and the business community has certainty as to the nature of the future EU/UK long term trade arrangement within which reliable just-in-time supply chains can be re-established. |
Sources:
(1) Guardian, ‘UK running out of food warehouse space as no-deal Brexit fears rise’, 18 November 2018
https://www.theguardian.com/politics/2018/nov/18/uk-running-out-of-food-warehouse-space-as-no-deal-brexit-fears-rise