Irish companies are moving to stockpile goods in Britain to safeguard supply chains as deadlock between the UK and the EU pushes them to sharpen plans for a no-deal Brexit.
With just six months to go before Britain leaves the EU, Irish businesses are competing with a growing number of online retailers for warehouse space in Britain as fears grow that a disorderly Brexit next March could stop or delay shipments to Ireland’s biggest export market.
"We will build up stock. Whenever the date is, there will be stock in the system one way or another," said Stephen Glancey, chief executive of C&C, the Dublin-based producer of Tennent's lager and Magners cider that makes most of its profits in the UK.
Ireland’s annual trade with Britain is worth about €65 billion, exposing its economy and thousands of businesses to heavy fallout if the UK leaves the EU without a deal.
But Irish companies are facing a tightening market for warehousing as retailers in Britain take more storage space to capitalise on the boom in online sales.
"All our clients are reviewing their plans for this," said Carol Lynch, partner with accounting firm BDO in Dublin. "The difficulty companies are facing, however, is the lack of warehousing space available [in the UK]. This is at a premium. [Stockpiling also] involves a significant investment in products, hitting cash flow."
Kevin Mofid, chief logistics researcher at Savills property consultants in London, said warehousing rents throughout Britain had risen 20-40 per cent in the past five years.
“Brexit probably couldn’t have come at a worse time for anyone looking to acquire new warehousing space in Great Britain,” he said.
“We’ve got a vacancy rate of roughly 6 per cent, which is way below historical norms. We’ve got 28 million square feet of vacant warehousing at the moment – back in 2009 that was 94 million.”
About 9.4 million square feet in new UK warehousing will open in 2019 but it may come too late for companies making Brexit contingency plans, Mr Mofid added.
Clonmel exports
C&C exports 160 million bottles of cider annually from its fermentation plant in Clonmel to Britain, where Magners is the third-biggest-selling cider brand.
Mr Glancey said C&C planned to increase UK shipments and store the stock at the group's brewery in Glasgow. "We will have quite a lot of stock in Clonmel anyway, so the immediate impact will be pretty small. We'd fill it and fire it over to the UK and keep it going for a couple of years," he said.
C&C also expects its Matthew Clark drink wholesale business in the UK, which supplies 19,000 bars and restaurants, to increase wine imports before Brexit. "All the wine suppliers are wanting to get as much stock into the UK as possible, … We've got quite a lot of space, so it's not an issue for us."
Dawn Farm Foods, a leading cooked meats producer that sells its products to 20,000 outlets across the UK, Europe, the Middle East and Africa, said it had taken out additional warehousing in Britain to ensure it could maintain supplies through any disruption.
"We've booked the space," said Larry Murrin, chief executive and a former president of Ibec, Ireland's biggest business lobby. "We will be creating an enhanced buffer stock to protect key customer supply chains."
But the company could not maintain the practice indefinitely, he said:
“It will be for several months. That’s to tide us through what is likely to be a period of significant continued uncertainty around ultimate Brexit agreement outcomes.”
But he added: “We are not going to let 35 years of really important and valuable relationships float down the sea of uncertainty called Brexit.”
UK production
Mr Murrin said he was also examining whether the company should increase production in the UK itself, where it already manufactures one product line. This would mean a “very significant investment”, he said, and the company had not made a final decision because it lacked clarity over the terms of Britain’s withdrawal from the EU: “We can’t judge in the light of what we know today.”
Coillte, the Irish state-owned forestry company, is also stockpiling in Britain to protect €300 million in annual timber sales to the UK's building industry. Fergal Leamy, its chief executive, said the business had taken increased warehousing in the market because it wanted to be certain of maintaining supply "no matter what happens".
“Ultimately it might be all right on the night,” he said. “But we’ve got to prepare potentially for up two months’ disruption and to ensure that our customers continue to receive products on a timely basis.”
– Copyright The Financial Times Limited 2018
