Brexit

Brexit Uncertainty Forces UK Cos To Stockpile Goods

British companies are preparing for Brexit by stockpiling goods at rates usually seen during times of war. In fact, according to a report in The Wall Street Journal (WSJ), just in the month of March, U.K.-based companies stockpiled raw materials and components at the fastest pace of any industrialized nation. Stocks of finished goods in the country also rose at the fastest pace on record last month.

After failing to get the British Parliament to back a deal for the country’s exit from the European Union (EU), Prime Minister Theresa May agreed to sit down with Jeremy Corbyn, leader of the main opposition Labour Party, to come up with a bipartisan agreement.

A no-deal Brexit could lead to border chaos, additional cargo inspections and high tariffs between Britain and the EU. With that in mind, companies are trying to prepare for the worst. A March survey of almost 300 businesses found two-thirds are making contingency plans for a no-deal exit, up from less than half in January.

For example, Stannah Group, a manufacturer of equipment such as chair lifts and commercial elevators in southern England, has £500 million (almost $600,000) in stock, compared to the approximate £100 million it usually keeps. Airbus, which makes most of the wings for its planes in Britain, has ordered suppliers to have at least a month’s worth of extra inventory on hand, and is hoarding its own parts at factories in the U.K. and Europe.

Meggitt PLC, an aviation components supplier to both Airbus and Boeing, has around £5 million in inventory, and London’s Heathrow Airport has stockpiled mechanical parts for equipment, as well as rubber gloves and other items needed for security checks. The British government has also ordered drug companies to stockpile supplies of critical medicines.

However, economists have warned that all the stockpiling could hurt the U.K. economy in the long run, even if a Brexit deal is reached. Not only is cash tied up in inventory, but companies are less likely to spend money on new parts and materials while they work with their excess inventory.

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