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Alan McKinnon – Professor of Logistics

THE 
LOGISTICS BLOG

Current issues in logistics and transport

Food Stockpiling for a No-deal Brexit: a serious proposition?

There has been much discussion recently in the UK media about the possible need for Britain to stockpile food in preparation for a ‘no-deal’ Brexit. 30% of the UK’s food is sourced from the EU, 50% more than from the rest of the world combined. So serious disruption to the inbound flow of food from the EU could pose a major problem.

In an answer to a Parliamentary Committee on the 24 July the new Brexit secretary, Dominic Raab, offered assurance that the country would have ‘adequate food supplies’ but said, ‘It would be wrong to describe it as the government doing the stockpiling’. This implied that the food industry would be taking responsibility for any stockpiling. This met with a cool response from representatives of the food industry who claimed that they had not been consulted on the matter. A senior executive of a large British supermarket chain was quoted in the Financial Times as saying ‘It’s ridiculous. It’s scary because it shows how far the government is from the reality of how things work. It’s genuinely worrying.’

Most of the press comment has questioned the feasibility of food imported from the EU being stockpiled in the period leading up to a no-deal Brexit. Ball, in an article in the Guardian, summarised the prevailing view when he stated that ‘factories couldn’t just step up production before the Brexit date and store the surplus… They no longer have much space to store their product’ since ‘the UK’s highly efficient supply chains work on a “just in time” basis’. In the FT article, the British Retail Consortium (BRC) explained that retailers too ‘do not have the facilities to house stockpiled goods and in the case of fresh produce it is simply not possible to do so’.

This focus on feasibility has diverted attention from the more fundamental question of whether stockpiling will actually be necessary.

You normally stockpile in anticipation of a temporary disruption to the flow of goods caused, for example, by an extreme weather event, industrial dispute or military action. In the event of a no-deal Brexit the disruption would not be caused by Britain’s former EU partners withholding supplies. Inbound trade would continue to flow but take longer to reach its destination in the UK. Customs delays at ports and airports would lengthen international transit times, perhaps by several days. As the BRC explained in a letter to the Prime Minister and EU Chief Negotiator , ‘Failure to reach a deal – the cliff edge scenario – will mean new border controls and multiple ‘non-tariff barriers’, through regulatory checks, that will create delays, waste and failed deliveries’. International food supply chains operating on a just-in-time basis have little inventory to buffer against such delays. This applies particularly to fresh produce entering the country. As Lang et al (2018) note, ‘Much of the stock and storage is in the trucks on the motorways and autoroutes’.

Any resulting food shortages might only be short-lived, however.

In theory, they should only last for the additional number of days that products spend in the supply chain because of the new customs arrangements. For example, if a 4 day delivery of fruit from a supplier in Italy to a retailer’s distribution centre in the UK were extended to 6 days post-Brexit, there would be a two day period of short supply. Thereafter, the system should adjust to the longer transit time and the availability of the product in the shops return to normal.

This, however, would be a new and significantly inferior normal, in several respects:

1. The extra in-transit inventory would increase supply chain costs and be reflected in higher prices / lower profits.
2. The longer delivery time would make the supply chain less responsive to short-term fluctuations in demand.
3. As it would now take longer to adjust the flow of product to these variations in demand, UK food manufacturers, retailers and wholesalers would probably have to increase their inventories, reversing the just-in-time trend of the past forty years. This would be a longer term development as many companies lack the storage capacity needed to accommodate the extra inventory. It would further inflate logistics costs.

One can construct an optimistic scenario in which a no-deal Brexit would only disrupt EU food imports for a few days and only affect products with relatively time-sensitive supply chains. In this scenario there would be little need for stockpiling. Consumer demand could temporarily switch to alternative domestically-sourced products or foreign-sourced foodstuffs with larger UK inventories. There might be enough short-term flexibility in the UK food supply system to deal with such a switch, keeping the impact on the average person’s diet to a minimum. After all, according to the Cabinet Office, the food industry ‘remains highly resilient owing to the capacity of food supply sectors and the high degree of substitutability of foodstuffs’.

On the other hand, in the days following a no-deal Brexit delays to inbound food movements could last much longer and the adjustment of EU-UK food supply chains to longer transit times prove more problematic. The UK Food and Drink Federation envisages a no-deal Brexit causing ‘disruption on a pretty epic scale, at least for a number of months’. This may be a more realistic scenario.

Cross-border transit times could become not only longer, but also more variable as ports and airports struggled to cope with the new regulatory regime. The reliability of food imports from the EU could then be significantly eroded long after Brexit day. This would be reflected in lower availability of many EU-sourced products on supermarket shelves.

This would still be a long way from a national emergency requiring the strategic stockpiling of basic foodstuffs to maintain the health and well-being of the population. A no-deal Brexit would unquestionably have an adverse effect on the performance of UK food logistics but would not push the country to the brink of starvation!

All this assumes, of course, that there will be no panic buying prior to a no-deal Brexit. Media speculation about Brexit’s possible impact will no doubt intensify as the critical departure date approaches, causing many consumers to stock up on food just in case. If it is mainly the general public that does the stockpiling, just-in-case at a consumer level will collide with just-in-time at an industry level, amplifying the negative effect of Brexit on food supply chains.

To minimise the need for any form of food stockpiling we should, as Lang et al recommend, ‘avoid a hard food Brexit at all costs’.

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© Professor Alan McKinnon 2018

Kuehne Logistics University
Hamburg
Germany

contactme@alanmckinnon.co.uk

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© Professor Alan McKinnon 2018

 

Kuehne Logistics University
Hamburg
Germany

 

contactme@alanmckinnon.co.uk

 

Contact me

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