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Following the UK’s decision in June 2016 to leave the EU, preparations for an orderly withdrawal are now well underway. But with much still to do, the looming risk of a no-deal Brexit on the 29th March has evoked fear that trading with the EU could soon become incredibly complicated because of sudden changes to customs processes. This fear has translated into businesses stockpiling ahead of Brexit to cope with the aftermath; should we leave without a deal. However, this option is generally not available to many businesses operating in the chemicals sector due to restrictions on holding large quantities of chemicals.

Why are businesses stockpiling?

The prospect of a no-deal Brexit, leading to import and export complications as a result of reverting to WTO rules on trade, has left businesses looking to mitigate potential issues to ensure processes run as smoothly as possible.

These import and export complications have the potential to disrupt the supply chain, causing shortages across the UK, throughout multiple industries. These concerns were reflected by James Knightley, Chief International Economist at the City Bank ING who stated that “manufacturing is so reliant on complex supply chains that precautionary inventory building is a necessity” [1].

What businesses are stockpiling?

From small domestic appliances to alcohol, ice creams to bikes, we are seeing a rise in businesses preparing for the worst.

Recent news articles have cited that drinks company, Bacardi, is stockpiling alcohol, noting it as “responsible and sensible precautions” [2] to ensure there aren’t shortages after we leave the EU. And Bacardi isn’t the only large business to take these steps.

The Guardian also highlighted that Honda, which manufactures in Swindon, has chosen to “front-load some production to ensure it could ship vehicles abroad before Brexit and build up its stocks” [1]. With just over 30 days left until the UK leaves the EU, it is becoming increasingly apparent that businesses, small and large are in a rush to stockpile everything from raw materials to finished goods [1]. In fact, the levels that businesses have been reaching “mark the highest level of stockpiling activity for a G7 nation since comparable records began in 2007” [1].

 Stockpiling in the chemical sector

For businesses in the chemical sector, however, stockpiling isn’t as feasible. Holding significant quantities of chemicals that are deemed hazardous requires hazardous substance consent under UK planning regulations, which place restrictions on operating sites. Operators may also find themselves falling foul of the COMAH Regulations where increased inventories mean that risk assessments have effectively been undermined.

This means that it is harder for those operating in this sector to take such steps ahead of Brexit. In addition, the locations deemed suitable are filling up fast. Storage capacity in general in December 2018 was at 75% full, according to the UK Warehousing Association [3].

According to an article in ICIS News in January this year, lack of available space at COMAH and SEVESO compliant facilities for storage of toxic and flammable chemicals was getting tight for the pre-Brexit period. It also notes that there didn’t seem to be any provision from the government to allow for any flexibility in the regulations, limiting site inventories – leading to a potential logistics headache for companies trying to ensure a smooth manufacturing period. It is to be hoped that a resolution can be found imminently, for the manufacturing sector to find some relief to this ever-pressing problem [3].

If you’re worried about the impact of Brexit on your business, get in touch with us.

 

[1]
https://www.theguardian.com/business/2019/feb/01/uk-manufacturers-stockpiling-for-no-deal-brexit-hit-record-levels

[2]
https://www.irishexaminer.com/breakingnews/business/bacardi-stockpiling-drinks-ahead-of-brexit-905007.html

[3]
https://www.icis.com/explore/resources/news/2019/01/23/10309877/pre-brexit-stockpiling-raises-risks-for-chems-storage/