J Sainsbury has warned that its shops in the North might have to offer a significantly reduced range of products in January if no trade deal is reached with the EU.
Chief executive Simon Roberts said he was among industry leaders meeting Michael Gove, a senior member of the UK cabinet, to stress the urgent need for clarity on the licence and import requirements that will be necessary to move goods from Britain to the North.
He said it was especially important that the UK government provided certainty soon given that retailers were also having to cope with the pandemic lockdown and the Christmas shopping rush.
“If we don’t get greater clarity on the Northern Irish situation then we will see a restriction on the ranges of products we can sell,” Mr Roberts said on a press call. “This is not one or two products in stores I am talking about – it is a substantial number of products, and quite key everyday products too.”
Sainsbury operates 13 stores across the North.
The North has been a thorny issue in Brexit negotiations for some time. From January, animal products transported there from Britain could require export health certificates. That, along with other customs declaration requirements, could significantly raise UK supermarkets’ cost of operating in the North.
The added paperwork is necessary because Northern Ireland will be bound by the EU’s customs rules after December 31st, meaning it will have to apply the bloc’s standards on animal health while Britain will not.
It is not only a problem for Sainsbury but also rivals Tesco and Marks & Spencer, because much of the stock in their stores in the North comes from Britain. With profit margins already narrow, the higher costs could prompt some retailers to turn their back on the North.
On Wednesday, M&S warned that its business in the Republic could be materially affected if no deal is agreed with the EU and significant tariffs and bureaucratic costs are added to food imports. Retail prices for shoppers could also have to rise to reflect increasing costs.
Sainsbury and other grocers want the EU and UK to set up a “trusted traders” programme to simplify the process. That would create a certified, auditable fast-track system for goods to flow into the North with the same ease they do now.
“Customers in Northern Ireland will expect to buy the same range of products in January as they do today, and it is our job to provide that to them, which is why we need clarity,” said Mr Roberts.
Deli counters
Separately on Thursday, Sainsbury said it could cut 3,500 jobs in a restructuring that will see in-store meat, fish and deli counters as well as 420 standalone Argos general merchandise stores close.
The group reported a loss before tax of £137 million (€152m) for the 28 weeks to September 19th, reflecting £438 million of one-off costs associated with the Argos store closures and other strategic and market changes introduced by Mr Roberts.
He plans to refocus on Sainsbury’s core food business, lowering prices, accelerating food innovation and growing online grocery services.
Underlying pretax profit was £301 million – ahead of analysts’ average forecast of £275 million and £238 million made in the same period last year.
Strong sales during the Covid-19 pandemic outweighed the extra costs and losses at its bank.
Mr Roberts also wants to increase the rate of new convenience store and neighbourhood hub openings over the next three years.
"We will put food back at the heart of Sainsbury's. Our other brands – Argos, Habitat, Tu, Nectar and Sainsbury's Bank – must deliver for their customers and for our shareholders in their own right." – Bloomberg/Reuters
