U.K. Faces Food Crisis Threat as Virus Surge Blocks Trade

(Bloomberg) -- The U.K. confronted threats of food insecurity and panicked shopping days before Christmas as European nations restricted trade and travel to guard against a resurgent coronavirus, offering Britain a preview of the border chaos to come in the absence of a Brexit deal.

Fearing a fast-spreading new strain of the virus that forced a strict lockdown across England, France on Sunday suspended travel from the U.K. for 48 hours and wants a stricter testing regime before lifting the blockade. Germany and Italy halted arriving flights from Britain with Spain and Portugal following suit. The crisis gave renewed urgency to negotiations for a trade deal with the European Union that remained at a critical stage after weekend talks.

Late Sunday, the Port of Dover stopped freight moved by truck into France while allowing unaccompanied cargo to keep moving. Traffic into the U.K. is unaffected, though truckers often run supplies in both directions and the latest outbreak in the heart of England may discourage them from entering the island.

The disruptions are exposing Britain’s trade vulnerabilities just as a 4 1/2-year odyssey to leave the EU moves from political rhetoric to economic reality. Business groups facing catastrophic losses urged Prime Minister Boris Johnson’s government to act soon, with the 18,000-member Logistics UK calling for rapid Covid-19 testing of truckers departing the country as the quickest way of protecting supply chains.

‘Nightmare’

“This is the nightmare before Christmas,” said James Withers, chief executive officer at the Scotland Food & Drink industry group.

He said there are more than 100 trucks laden with seafood due to cross the border into the EU, bound for Christmas wholesale markets in France and Spain that would normally be held on Wednesday. Fears are growing that live shellfish will spoil if they’re held up at the border, and the government needs to act today to ensure that the freight can keep moving, he said.

French Transport Minister Jean-Baptiste Djebbari said European nations are working on “a solid health protocol” to be implemented “in the coming hours.” Container ports and ferry terminals were already congested because of stockpiling ahead of the Dec. 31 deadline marking a final break from the European single market.

What Bloomberg Economics Says...

“We now expect the economy to experience a double-dip recession with output contracting both in the fourth quarter of this year and the first quarter of 2021. The big question posed by the mutated version of the virus and the latest round of restrictions is what comes after Christmas.”

-- Dan Hanson, economist

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But a meeting of the EU’s crisis response experts in Brussels on Monday ended without reaching a decision on how to proceed regarding U.K. travel, according to an EU official, who spoke on condition of an anonymity. Some members of the group called for an urgent discussion at political level to resolve the issue.

Supply Chains

In the U.K., officials sought to downplay the urgency of the situation. Jamie Davies, the prime minister’s spokesman, urged Britons not to panic-buy groceries and said “we have resilient supply chains and it is the case that the majority of our food doesn’t come in through the short straits.”

Asked about the vaccine, Davies also said the U.K. already has “the majority of this year’s supply” from Pfizer Inc.

The border chaos comes at the tail end of a year that’s seen Johnson nearly die from the virus and come under heavy criticism over his response to the pandemic, which left the U.K. with a death toll second only to Italy in Europe and the worst hit to output of any major economy.

British supermarket chain J Sainsbury Plc said it is considering using air freight for products sourced from Europe. If the situation doesn’t change, Sainsbury will start to see “gaps” in the coming days sourcing some fruits and vegetables, said Victoria Durman, head of corporate communications.

There were long queues at high-end supermarket Waitrose on north London’s Finchley Road and many fresh fruit and vegetable shelves were empty. Outside Tesco on Tooley Street near London Bridge about 10 people were waiting at lunchtime to enter the store.

Outside Dover, trucks began lining up on the M20 motorway as the “Operation Stack” emergency plan was triggered with drivers unable to board ferries. The Department for Transport was also preparing Manston airport in Kent, which is being overhauled to accommodate as many as 4,000 vehicles as part of Britain’s no-deal planning, according to the local government’s website.

“There could be a period of disruption at some of the U.K.’s ferry ports for the next 48 hours,” said Richard Ballantyne, chief executive officer of the British Ports Association.“We are confident that the U.K. will continue to be supplied.”

Stocks Hammered

U.K. travel, leisure and retail shares slumped on Monday as flights were canceled, while stay-at-home stocks, like Ocado Group Plc, got a boost. Airlines were among the worst hit, with British Airways parent IAG SA falling as much as 20% and Easyjet Plc down as much as 18%.

The economic drag of tougher restrictions and trade turmoil will only deepen the hole the country is in, unleashing more damage stretching from mom-and-pop retailers to already struggling European airlines.

Then there is the political fallout. Johnson abruptly scrapped plans to allow families to mix over the holidays as the government warned over the weekend that the new strain of the virus is “out of control.” There was chaos at train stations, with people defying social-distancing rules to get out of the capital.

More than 16 million Britons are now required to stay at home, mainly in London and southeast England. The measures ban household mixing in the capital and the southeast, and allow households to see each other just on Christmas Day across the rest of England.

©2020 Bloomberg L.P.