Brexit information void threatens planning

London, UK: Companies have been left in the dark over planning for Brexit amid an “information void”, warns the Institute of Directors.

It has called on the government to speed up guidance on what companies should expect if no deal on leaving the EU is reached.

Its survey of 800 business leaders showed fewer than a third had made any Brexit contingency planning. Many said they were waiting for clarity about the future EU relationship.

Almost half of respondents did not anticipate drawing up nor implementing any contingency plans for Brexit, with a similar number not expecting Brexit to affect their organisation.

Stephen Martin, director-general, Institute of Directors, said it was difficult to blame companies that had failed to prepare for the UK’s departure. “When it comes to knowing what to plan for and when, firms have been left in the dark,” he said.

“Trade associations like the IoD are doing their best to fill the information void, but the reality is that many companies feel they can only make changes once there is tangible information about what they are adjusting to.

“As long as no deal remains a possibility, it is essential that the government steps up to the plate and provides advice on preparing for such an outcome.”
The IoD called on ministers to speed up publication of the technical notices on Brexit. Martin said doing so would remind companies what they needed to do to prepare for all Brexit eventualities.

“Any transition period must take account of the fact that many businesses feel they can only adjust once there is clarity about the direction of travel.”
No where is a Brexit deal needed more than the food industry which depends on just-in-time supply chains. UK supermarkets keep very little in stock relying on overnight deliveries with much of the food coming through Dover.

“If there were to be no deal there would be many, many months of disruption to existing choices,” said Ian Wright, of the Food and Drink Federation, “frankly until some kind of deal was reached.”

The government is planning to publish, in two tranches in late August and early September, about 70 technical notices on how businesses and consumers should prepare for no deal. A good number of these will affect the food industry. But industry experts fear the government does not grasp the seriousness of the situation. Andrew Opie, of the British Retail Consortium points out that in the run-up to last Christmas 130 lorry-loads of citrus fruit came through Dover from Spain every single day. “That’s the sort of volumes we’re talking.”

The BRC estimates that, on average, more than 50,000 tonnes of food passes through British ports every single day from the EU. So border delays, caused by sudden customs and regulatory checks, could very quickly lead the distribution system to break down. For fresh produce that could mean shorter shelf lives, and rising costs in the system.

Industry sources say the government has suggested that it would keep regulatory checks at borders to a minimum in the event of no deal, in an effort to keep traffic moving. But that wouldn’t help much if robust checks were being carried out on the EU side.

“If there were big border hold-ups, after three days there would be gaps on the shelves in fairly short order,” said Chris Sturman, chief executive of the Food Storage and Distribution Federation (FSDF).

The trouble is there is very little spare storage capacity. According to the FSDF, there are 385 refrigerated warehouses in the UK, but more than 90% of refrigerated warehousing is in constant use and margins are extremely tight.

Supermarkets are certainly making contingency plans. But rather than involving stockpiling food, which one executive described as a “non-starter”, they revolve around how they might be able to source produce from other countries if European supply chains are seriously disrupted.

They have done that before. For example, bad weather in Spain last year meant lettuces were temporarily imported by air, and therefore more expensively, from Latin America, and supplies were rationed. The 2015 industrial action in Calais also promoted retailers to diversify their supply chains.

But these are short-term fixes and at the moment the whole industry is trying to plan for an outcome that is impossible to predict.

“We’re not going to run out of food if there is no deal,” said Ian Wright from the FDF. “There is a way to increase capacity, to grow more of particular vegetables, to cut out the waste that occurs at the moment. “But the short-term disruption could be severe. The government needs to understand that.”

Another big issue is medicines. There is more scope with medicines than with food to increase stocks of things like tablets, but other imported drugs such as insulin often need to be refrigerated and may therefore pose bigger logistical challenges. The UK-based pharmaceutical company AstraZeneca told the BBC on 17 July that “as a safety net” it was increasing its drugs stockpiles across Europe by about 20% in preparation for a no-deal Brexit.

AstraZeneca’s chief executive, Pascal Soriot, has subsequently said the company is doing everything it can to be prepared, and to make sure patients do not run out of their medicines. “We typically run about three months of inventory for our medicines,” he said. “We are increasing this by one month so that we have additional inventory to protect against a disorderly Brexit, if you will.”

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