“Stock-out” is a new phrase for me, but the meaning is obvious – it is just supermarket shorthand for being out of stock. And when a supermarket is out of stock, the result is empty or partially empty shelves.
These are being seen once again in UK supermarkets, and images of them are being shared on social media. And it is worth stating once again that there is a simple reason why stock-outs happen more than they used to: Brexit. Leaving the EU has seriously stymied the UK’s food importation and distribution sector.
Shane Brennan is head of the Cold Chain Federation, the industry that transports and stores perishable foods across the country. As he told me: “One of the reasons why you see stock-outs on supermarket shelves is that supermarkets have tended to operate on a ‘day one for day two’ system. So, the store manager will make an order for their goods the night before, for the next day.”
But that has been changed by Brexit, so now supermarket managers have to make predictions about what they are going to need not for tomorrow but for two or three days ahead. “You’re going to make more predictions around what you’re going to sell or you’re not going to sell. And actually, you end up having to be more risk-averse in what you order, to avoid wasting stuff,” says Brennan. “So, you end up tolerating more stock-outs. That’s essentially what happens.”
Simple geography means that the UK is a messier, more complicated market to supply than many in Europe – it is overseas from lots of its suppliers and therefore it is at the end of the supply chain. But that has always been the case, and it all worked perfectly well before Brexit.
Since then, however, foreign suppliers have decided that they don’t really need the red tape and added expense associated with supplying the UK. There are easier and closer markets without any hard borders to navigate. As a result, the added delays, bother and cost of Brexit just make ordering what supermarkets need for tomorrow more difficult. They have to plan further ahead and that means they are far more likely to get things wrong. The result? Stock-outs and empty shelves
Of course, the government won’t say the B-word when discussing this. It is trying to blame stock-outs on bad weather in Spain, the “weird supermarket culture” in the UK and anything else that comes to mind. But the fact is the shelves in continental supermarkets are groaning under the weight of fresh fruit and veg and ours aren’t.
If supply problems were just a matter of a slight shortage of cucumbers in December we might just be able to laugh this off. But remember the UK has yet to introduce its checks on food and food products entering the UK. The EU managed to introduce tests on our produce and food exports on day one of Brexit, a move that stopped 30% of UK food firms exporting at all.
It seems safe to assume that when the UK finally gets round to introducing the long and repeatedly delayed checks next year the consequences will be much the same for goods coming into the UK. Many continental firms will be put off by the costs of veterinary inspections, government fees and checks causing delays.
The problem will be especially bad for smaller firms which might only put one or two pallets on a lorry that carries produce for a dozen other firms; the red tape and delays will strangle the business, as just one mistake on one form for one pallet will mean the whole lorryload is rejected. The result of all of this will be higher inflation, less choice, more delays and more stock-outs.
This should hardly come as a surprise, Professor Michael Gasiorek is head of the UK Trade Observatory at Sussex University, and co-director of the Centre for Inclusive Trade Policy. As he points out, the collapse in trade between the UK and the EU post-Brexit was not mainly on exports by the UK to the continent but the other way round; it was UK imports from the EU that have collapsed.
Gasiorek’s explanation is simple: “For many EU suppliers, the UK is not that important a market. And in the face of the uncertainty, the possible bureaucracy and all this, they have just decided it’s not worth it. ‘We don’t need to worry about trying to export to the UK, it’s not so important to us, we can export elsewhere’. Whereas for many UK firms, that’s not the case – the EU was a very important destination, therefore, they needed to make sure they could continue to trade.“
This is easy to understand if you look at the numbers. The UK’s population of 66million is now, for EU exporters, a market behind trade barriers, the European Economic Area’s 453million customers are a vital market for UK firms which must be supplied at any cost.
As a result, EU exports to the UK are down by 20-25% and seem unlikely to recover. Remember many of the foreign companies that set up in the UK did so because it had access to the EU’s single market; now the UK has left they are far less likely to base themselves in the UK. Which helps explain the decline in inward investment into the UK, and also why supermarkets here are so less well supplied than the ones on the continent.
There is some hope that things might improve in the near future. Labour says that it will seek an agreement with the EU on food standards that will reduce, if not eliminate, the need for checks and red tape. Keir Starmer will not seek full alignment with all EU standards but would try to get an agreement on dairy and meat produce and products, which is, to be fair, the major stumbling block.
But Shane Brennan has his doubts about whether that would work. “I would be sceptical about whether or not an incoming Labour government can deliver on that promise quickly and in a straightforward way,” he told me. And there are several reasons for that scepticism.
First, Lord Frost tried the same thing during the original Brexit negotiations. He sought an “equivalence agreement” that is, British standards may differ over time from the EU’s, but they are still deemed so good as to be “equivalent”.
The EU refused to allow this and insisted there could be no deal unless the UK agreed to full regulatory alignment. The UK would have to follow EU rules, no questions asked, to the letter, for ever. They seem very unlikely to change their minds now, after all their own supermarkets’ shelves are full.
Secondly, the EU is not interested in a deep re-opening of negotiations and if it did deign to do so, it most certainly does not want a “pick and mix” deal like the one it has with Switzerland, which is what the UK would be asking for. The EU basically sees its relationship with the Swiss as a pain in the neck and wishes it had never gone down the road of allowing the Swiss to negotiate a one-off deal; it is not about to start another such deal with a much larger neighbour.
Third, the UK has already signed trade deals with countries with lower food standards and renegotiating with the EU would endanger those deals
Finally, if Starmer makes it to No.10 he will have an agenda as long as his arm and solving the supermarkets’ supply chain problems will not be at the top of the list – not unless we actually run out of food.
Brexit and the damage it does is increasingly being hard-wired into the British economy. Supermarkets, other stores, the catering industry and cold chain suppliers are just suffering under the added costs, delays and bureaucracy; things that can only get worse once the UK introduces checks on its food imports in 2024.
Meanwhile, a thousand other industries have either given up bothering to trade with the EU, have just decided to swallow or pass on the costs involved to their customers or have come up with a workaround which isn’t perfect and isn’t as good as the pre-Brexit arrangement but which they can live with. And even a future anti-Brexit government could shrug its shoulders, decide it has bigger fish to fry and just blame Boris Johnson for any problems.
This is Brexit writ large: Higher costs, more bother, less choice, more red tape, lasting damage, a less attractive place to do business. And for the residents, a place where they will just have to learn to live with stock-outs and empty shelves.
