Amid uncertainty of post-Brexit trading, foodservice firms are preparing for challenges by stockpiling
With little over one month to go before the UK is scheduled to leave the European Union, many foodservice businesses are entering the final stages of their preparation. Though, at the time of writing, uncertainty still dominates the debate about how and when Brexit might finally happen.
Though the scheduled date for the UK to leave the EU is currently 29 March there is still heated debate about the exact terms of an exit deal and, indeed, whether or not it will even go ahead. Currently though, in the absence of agreement on a deal to leave, most businesses have seen themselves forced to prepare for a no-deal Brexit.
As a bloc, the EU is currently the UK’s largest trading partner – according to the Department for Environment, Food and Rural Affairs nearly one third of the food eaten in the UK is imported from the EU.
In the case of a no-deal Brexit, perks of EU membership including customs duties-free trade, will fall away and WTO tariffs will be implemented, effecting an increase in food prices. The British Retail Consortium has said the price of imports could rise by as much as 22%.
It is in this climate of uncertainty that businesses, large and small, have implemented arrangements for Brexit, deal or no deal. Amid reports that frozen and chilled food warehouses, storing everything from garden peas to cold-store potatoes, are fully booked for at least the next six months, it is clear that many have embarked on a stockpiling exercise in order to fulfil customer demands.
Among those who have contracted additional storage space are catering companies. “Given the level of uncertainty we are investing heavily in a contingency plan to protect our customers,” says Apetito CEO Paul Freeston. “We are determined to do everything we can to maintain supply.”
The catering firm, which supplies the health and care sector and provides ready-made meals to over 400 hospitals and 450 care homes, in addition to 100,000 vulnerable people in their homes, announced that it has invested £5m to increase stocks of raw materials and finished goods as Brexit day nears.
Freeston explains that Apetito has begun the process of doubling the raw materials it holds from four to eight weeks’ of stocks. The firm has also taken out 1,200 additional pallet spaces of frozen storage to hold extra stock.
Clarity and certainty
Fellow catering firm Bidfood has undertaken an assessment of the potential outcomes of Brexit. Serving 48,000 customers across public and private sectors, it is similarly concerned with maintaining supply of service to customers.
The assessment process has involved talks with suppliers, customers as well as logistics providers including third party transport and warehousing providers and UK and EU customs. “Our aim has been to provide clarity and certainty of security of supply in very volatile and uncertain times, by planning for a worst case no-deal Brexit,” says Jim Gouldie, Bidfood director of supply chain and technical services.
But given the uncertainty about the nature of the ultimate break-away that has dominated the time since the 2016 referendum, Bidfood has had little option but to make plans for a no-deal Brexit. “Our current planning has had to navigate considerable ambiguity in many areas, which is why we have invested significant time and resource to minimise as many of the risk factors as we can,” says Gouldie.
“A negotiated deal would allow us the time to plan, work with EU colleagues on a trade deal, and source alternative products as the transition period would mean that no changes come into effect until December 2020.”
Accounting for the unknowns
Like Apetito, Bidfood has implemented contingency stock plans, involving significant investment in additional warehouse space to hold up to eight weeks’ extra stock.
Looking to trading post-Brexit, it has had to factor in several unknowns, including tariff levels, currency fluctuations, level of checks at ports in the UK and EU and the level of readiness by the wider industry and supply chain in preparation for Brexit.
In the case of a no-deal Brexit, the potential impact on the public sector clients is clear to Bidfood. “As yet we don’t have clarity of what tariffs will be applied to products that are imported from the EU and hence assessments have been based on WTO tariff levels,” says Gouldie.
“However, we do know that public sector budgets are tight and any increase in cost will be a key concern for public sector customers that have a duty of care to feed residents, patients, pupils and students and where food is a cost rather than an item they can sell.”