No-Deal Brexit Threatens Christmas Chaos, U.K. Retailers Warn

(Bloomberg) --

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 Plc and Tesco Plc, Britain’s two largest grocers, fill their warehouses with toys, TVs 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.

No-Deal Brexit Threatens Christmas Chaos, U.K. Retailers Warn

“You couldn’t pick a worse date,” said 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 prime minister -- Boris Johnson and Jeremy Hunt -- have said they support pursuing a no-deal split if the U.K. can’t get an improved Brexit agreement with the EU.

Logistically, warehouses filling up with seasonal goods leave little room for extra Brexit-related contingency stock, said Dave Lewis, Tesco’s CEO. 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, Lewis said.

“All of the network will be full of things getting ready for Christmas,” he told the BBC. “If there’s a problem at the border, if there’s a problem with tariffs, there could be interruptions.”

No-Deal Brexit Threatens Christmas Chaos, U.K. Retailers Warn

A lack of warehouse space isn’t the only issue. There’s also a shortage of available labor, equipment and management systems to provide companies a one-stop solution for their stockpiling, said Peter Ward, CEO of the U.K. 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 last March put themselves at a competitive disadvantage, which may dissuade them from doing it again, said Mike Cherry, national chairman of the Federation of Small Businesses, which has 170,000 members.

Then there’s 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 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 that ramped down their no-deal planning at the end of March are struggling to get it going again.”

Calls from Johnson and Hunt for Britain to increase no-deal preparations prompt anger from business owners like Guy Blaskey, founder of Pooch & Mutt, a maker of superfoods for pets. Blaskey stockpiled 400,000 pounds ($503,000) worth of product before the earlier Brexit deadlines in March and April, and needed to take out a loan to cover the costs. He’s 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.”

©2019 Bloomberg L.P.

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