Brexit Stockpiling Frenzy Leaves Firms With Few Warehouses

0

An employee works at the Airbus SE assembly factory in Broughton, U.K., on Jan. 16, 2017. Airbus, which makes the wings for its airliners in the U.K., has been asking suppliers to stockpile parts to protect it against production disruptions from Brexit.

An employee works at the Airbus SE assembly factory in Broughton, U.K., on Jan. 16, 2017. Airbus, which makes the wings for its airliners in the U.K., has been asking suppliers to stockpile parts to protect it against production disruptions from Brexit.


Photo:

Matthew Lloyd/Bloomberg News

Global companies are stockpiling so many parts, ingredients, drugs and other goods ahead of Britain’s planned exit from the European Union next year that storage space in the U.K. is running out.

Pfizer Inc., Airbus SE and Imperial Brands PLC, maker of Winston and Salem cigarettes, are among a raft of businesses stocking up to secure supplies ahead of a March separation date. Their concern is that the U.K might exit the EU without agreements in place to minimize disruption at the border.

British lawmakers are set to vote next week on a plan that could allay these fears, but the proposal has been criticized across the political spectrum and isn’t expected to gain Parliament’s approval. That would likely lead to more talks between the U.K. and the EU, including the specter of a “no-deal” Brexit in which the U.K. essentially crashes out of the free-trade bloc, threatening to slow, or even halt, the flow of goods that now move across the English Channel.

Businesses and logistics firms say contingency planning for that worst-case scenario has stepped up in recent months as politicians haggle. With so many companies hoarding supplies, there are reports of shortages in warehouse space in some areas.

“We are turning businesses away every day, every single day,” said Ken Rattenbury, chief executive of Wild Water, a Cardiff-based cold-storage company. “Everybody is looking to stockpile. Customers are worried about raw ingredients, flour, meat produce—everything you can think of.”

Wild Water facilities have been fully booked for five months and the company is investing in extra space to help meet demand.

The U.K. Warehousing Association, a trade group, says there is a particular lack of space close to densely populated areas.

Airbus, which makes the wings for its airliners in the U.K., has been asking suppliers to stockpile parts to protect it against production disruptions from Brexit. The European aerospace giant has said its planning right now is based on a “no-deal” outcome. “In a week’s time, hopefully, we will know more but even then, there are still uncertainties,” Chief Executive Tom Enders said this week.

“We may certainly not have contingency plans for everything,“ he said. ”But I’m quite confident. If a withdrawal agreement comes through, we are well prepared.”

While some companies are able to accommodate additional stocks at their existing facilities, others have had to look for more space. Heineken NV and Burger King, a unit of Restaurant Brands International Inc., have sought additional storage for beer and frozen burgers, according to people familiar with their contingency planning.

Food companies are especially vulnerable to disruption at the border since many perishable ingredients and finished products need to be kept cold or frozen, and fewer warehouses suit that purpose.

“Frozen and chilled [facilities] are for all practical purposes booked out at the moment,” Ian Wright, chief executive of the Food and Drink Federation, told lawmakers at a recent hearing. He said members of the trade association had difficulty finding space and that what was available was often in the wrong part of the country.

Charlie Pool, chief executive of Stowga, a warehouse-renting platform similar to travel site booking.com, said rates at storage facilities have risen by about 10% since September as contingency planning kicks in. Big warehouse owners such as supermarkets—which typically use Stowga to rent out their spare storage capacity—in October removed from the market about 600,000 pallets of space, equivalent to 12 football fields. Half that was for cold storage.

“Supermarkets want to keep the space to themselves in case they need it for Brexit,” Mr. Pool said.

A shortage of cold storage is a challenge for the pharmaceutical industry, which needs to refrigerate a lot of medicine.

“At the moment, we’re probably near capacity on refrigeration,” Pinder Sahota, general manager for the U.K. operations of Novo Nordisk A/S, told British lawmakers at a recent hearing. The Danish insulin maker has doubled its stock in the country.

Nestlé SA recently disclosed it had accelerated planning for a no-deal Brexit, stocking up in the U.K. as well as in some European markets that it exports to from Britain. But the Swiss company cautioned there are limits to such efforts; aside from availability of warehousing, factories don’t necessarily have the capability to suddenly increase or reduce output, and certain ingredients for its goods have a shelf life.

Newsletter Sign-up

Laying claim to additional storage space isn’t an option for some companies. “I am not stockpiling because I don’t have the cash,” said Chris Ormrod, managing director of Flavourworks, a maker of flavored butters based in southwest England. If he could afford to, Mr. Ormrod said he would absolutely stockpile three to four months of butter.

Andrew Opie, director of food and sustainability at the British Retail Consortium, a trade association, said Brexit is slated for a particularly bad time of year—when Britain is especially reliant on imports of fresh, but perishable, produce. Strawberries from Spain, for instance, might have a shelf life of just four days.

“There is a limit to how much you can stockpile,” Mr. Ople said.

Appeared in the December 7, 2018, print edition as ‘Brexit Puts Squeeze on Storage.’