Owen Cooke has been fielding some tall orders from businesses in recent times.
Brexit and the prospect of delays moving goods through Irish and British ports has meant the chairman of the Independent Express transport group and the Pallet Network storage and delivery businesses are in demand.
Storage space is scarce as warehouses are still running near full capacity as a result of companies stockpiling for the potential crash-out Brexit ahead of the last critical deadline at the end of March.
Now, the growing likelihood of a no-deal exit by the next deadline at the end of October is putting pressure again on operators of warehouses and storage businesses. It is not helped by the fighting talk from British prime minister Boris Johnson and his insistence that the UK will leave on October 31st, deal or no deal.
The bigger challenge this time around is that companies are juggling not just all the chaos that would come from a no-deal Brexit but they would have to deal with it at the busiest time of year for stockpiling as they prepare for Christmas and the busiest sales period in the calendar for retailers and other businesses.
"Normally at that time of year everyone in the supply chain would be at maximum capacity and anything else that puts a strain on that creates very significant problems," said Cooke, whose company has about 250,000sq ft of storage space at North West Business Park near Blanchardstown in west Dublin.
“There is a very, very little capacity anywhere in the supply chain and October is the peak in general terms in all sectors so if there was a crash-out then, all hell would break loose.”
British Sugar
Brexit is forcing international companies to look hard at their supply chains.
British Sugar, owned by the multinational Associated British Foods, sells large amounts of its produce in the Irish market every year directly from the UK. The company has been seeking enough storage space for several months' worth of supply to the Irish market to get over potential no-deal Brexit blockages.
Stockpiling product in Ireland instead of relying on its supply chain continuing from the UK as the country is leaving the European Union would allow the business time to shift the supply chain so that the product could be supplied to Ireland from its base in Spain, another EU country, thereby avoiding non-EU checks from the UK.
Food company Kellogg’s has been looking for warehouse space in Dublin too – roughly five or six times what Cooke’s biggest client would have – so that its supply from the UK into Ireland would not be interrupted by Brexit. Taking on these kinds of risks – setting aside large amounts of warehouse space for short-term just-in-case contingencies to sustain supply chains – is not something smaller operators can do.
“They are looking to hedge their bets and for others to take the risks for them, which we were not prepared to do. It would mean that we would give them a short lease and if there wasn’t a hard Brexit or some other kind of deal was done, they would pull out of our warehouse and leave us with a big gap to fill,” said Cooke.
British Sugar, for its part, said that it has supplied sugar into Ireland for many years and remains committed to supporting customers “with a reliable supply”.
“We have planned for all potential Brexit scenarios and continue to keep these plans under review to ensure that there will be minimum impact for our customers,” a spokeswoman for the company said.
Kellogg’s declined to comment on its Brexit plans for Ireland.
Rethink
The challenge arising from the UK’s departure is forcing a rethink of operations for some companies.
Traditionally, many businesses stored stock in warehouses or had their own storage facilities in Ireland but moved their distribution units back to the UK or other parts of Europe because of the ease and inexpensive movement of goods across the EU's single market.
Now, because of Brexit, they are having to look for Irish warehouses again.
The Irish Exporters Association said there was "very little available warehousing space," particularly in the temperature-controlled and cold-storage warehousing required by the pharmaceutical and food industries.
“Brexit pressures are only amplifying these shortages. Importers specifically now need increased warehousing space as they prepare for a possible breakdown in their supply chains in the immediate aftermath of a potential no-deal Brexit,” a spokesman for the association said.
The business lobby group says it has been highlighting the industry’s concerns with Government about the lack of warehouses, particularly at the ports and airports, for a number of months.
“We are aware of a number of companies struggling to find appropriate warehousing space,” he said.
The intensification of the Brexit political drama in British politics with Johnson’s election means companies are emerging from what one warehouse operator called “a bit of a Brexit holiday” since the March deadline was put back by six months.
"Warehouses are still pretty full, though we do feel that there has been some movement by companies to run down the stocks they had built up coming to March," said Tom Thornton, Brexit spokesman for the Irish International Freight Association and managing director of Dublin logistics company Wells Cargo.
“We expect to see more pressure coming back on in August and September as people head towards the October deadline . . . there is clear political anxiety developing that a no-deal Brexit is possible and we expect to see this convert into market pressure again with trade.”
It could not come at a worse time as traditionally importers and exporters do not just ramp up stockpiling the likes of winter clothes, promotional stock and non-food Christmas produce, but look for space to store sales in the early part of next year.
“Anyone who is trying to stock up other stuff, anything for the New Year, they are not going to have anywhere to store it,” said Neil McDonnell, chief executive of Isme, the representative body for small and medium-sized businesses.
“What you will have happen is that you will have rationing by price: those who are bidding highest will get the storage space and this will reduce the amount of stock that is available for Christmas.”
Higher costs
Higher costs for businesses as a result of Brexit will lead to higher costs for consumers. Cooke conservatively estimates that storage and transport costs as a result of post-Brexit delays at borders and ports, doubling the amount of time it takes to get products from A to B, could be 15 to 20 per cent higher.
“The cost increase in consumer goods in the Republic is going to be massive, never mind the difficulty that Irish exporters are going to have getting their product into the UK,” said Cooke.
McDonnell points out that the working capital costs soaked up by preparing for the March Brexit deadline spilled into later parts of the year for businesses and that these costs could spill again from this year into next, if the autumn brings further political chaos – as expected – ahead of the October 31st deadline.
“Even if we get away without a hard Brexit, we are going to be suffering stockpiling into Q1 and Q2 [the first six months] of next year. It is a no win no matter what happens,” he said.
“There is a cost to this brinkmanship and it is a massive working capital drag on business. It is very easy for the Government to say that you have to prepare for a no-deal Brexit and you have to do this and do that but at the end of the day people have to pay. In trading terms, businesses are essentially buying futures.
“You have to hold it long or sell it cheap. Either way, it just hoovers up working capital.”
Approval for storage
The Revenue Commissioners is doing its part to help with the storage issue by trying to approve more space that can be used to hold non-EU goods from the UK and not fall foul of customs rules.
So far this year, they have authorised 63 warehouses as being “custom bonded”. This will help deal with goods coming and going to the UK. This compares with 11 authorisations in 2018, according to the statistics provided by the Revenue.
The 63 figure includes 12 new warehouses and 51 warehouses that were already authorised but which have been reassessed under the EU’s customs rules, the Union Customs Code.
Still, despite the no-deal Brexit preparations by Revenue and right across State agencies, some businesses feel that the Government has delivered a mixed message over the past year by telling companies and traders that they need to prepare for a no-deal Brexit while at the same time saying that such a scenario was unlikely.
“When you give that message – that they don’t believe there will be a no-deal – it is bound to tell people not to be stressed about it. People have got to readjust to start thinking to prepare for that,” said Thornton.
Cooke goes further criticising the Government for suggesting that the country could in any way be ready for the UK leaving the EU.
“We are anything but prepared for a Brexit,” he said.
