Disruptions caused to the U.K. retail industry by the shift to new trading arrangements between the EU and U.K. may not prove as significant as first feared. In the food industry, Wm Morrison Supermarkets PLC CEO David Potts has said "there is no issue with the flow of merchandise between mainland Europe" with the qualification that "any delay on the back of paperwork and process post-Dec. 31 is yet to be felt or yet to be visible," Reuters reported.
As flagged in Panjiva's research of Dec. 28, the risk of customs disruptions to perishable goods may pick up once the new year lull ends due to issues with government IT systems.
A similar situation is being seen in the apparel industry. Next PLC has stated in its latest trading statement that it "does not anticipate that Brexit will have a material impact on our ability to import and export stock in the year ahead."
Instead, Next has noted that "the pandemic has adversely affected the flow of container traffic from the Far East" leading to delays of two to three weeks with the "level of disruption (expected) to continue into the new year" which runs from Dec. 27, 2020.
That should not be a surprise given the surge in container rates on China-to-U.K. routes late in the year. Other firms may outline the impact from container freight congestion in the forthcoming fourth-quarter 2020 earnings reporting season including both slower deliveries and increased costs.
The challenge of imports of apparel from Asia rather than the EU in part reflects the mix of U.K. sourcing of apparel and footwear. Panjiva's analysis of official data shows the EU accounted for just 35.4% of U.K. imports of clothing and footwear in the 12 months to Oct. 31, though that did mark an increase from 30.2% in 2015.
The second largest source of supplies has been China with 24.7% of shipments after a 79.4% surge in shipments in the three months to Oct. 31. India has been the main loser from the rotation to EU sourcing with the proportion of U.K. imports from India having dropped to 3.9% in the past 12 months from 6.1% in 2015, falling behind supplies from Bangladesh.
Panjiva's data shows that shipments to the U.K. from India linked to Next have been in decline with a 12.0% year-over-year slide in the three months to Oct. 31 after a September surge was reversed. Similarly, discount retailer Primark Ltd's shipments declined by 33.2% and online supplier ASOS PLC's imports fell by 53.3%. Yet, not all importers have been cutting back with shipments linked to multi-line retailers Marks & Spencer Group PLC and Tesco PLC having risen by 19.0% and 28.2%, respectively.
Christopher Rogers is a senior researcher at Panjiva, which is a business line of S&P Global Market Intelligence, a division of S&P Global Inc. This content does not constitute investment advice, and the views and opinions expressed in this piece are those of the author and do not necessarily represent the views of S&P Global Market Intelligence. Links are current at the time of publication. S&P Global Market Intelligence is not responsible if those links are unavailable later.