Stockpiling. The act of accumulating a large stock of goods or materials.
Something which many businesses are doing ahead of the Brexit deadline.
Majestic wine was widely reported to have been stockpiling wine back in 2018 ahead of the original Brexit leaving date of the 31st March. Whilst recent reports suggest that as well as goods and materials, small businesses are stockpiling their cash reserves in current accounts ahead of Brexit.
Individuals are also stockpiling for their homes – in particular food and medication. In total it is thought that over £4billion has been spent on stockpiling in the run up to Brexit.
Why are businesses stockpiling ahead of Brexit and if you choose to stockpile, what impact can this have on your business?
Why are businesses stockpiling ahead of Brexit?
Brexit stockpiling is mostly occurring in response to the possibility of a no deal Brexit. There is concern that the transportation of goods which are being imported from EU countries will slowdown. And that shortages and reduced availability could push prices up in the weeks and months following Brexit if we leave without a deal.
It is likely that businesses are therefore stocking up to get ahead of this and to ensure they can still supply their customers.
Will your business be stockpiling ahead of Brexit?
Some reports suggest businesses are not as willing to stockpile this time around.
Many businesses stockpiled ahead of the 31st March deadline which was then postponed. And are now facing the decision of whether to stockpile again ahead of the 31st October. Despite having no certainty over whether this will be the final leaving date or what the outcome of the negotiations will be.
Other reports suggest that warehousing space is simply short given that businesses will already be preparing for Christmas and other events such as Black Friday.
What impact can stockpiling have on a business?
Stockpiling may seem like the sensible thing to do if you are concerned about your business being able to get hold of goods or materials following Brexit. But you do need to keep in mind what impacts stockpiling may have on your business.
Cashflow impact – A recent report from Premium Credit suggests that stockpiling is slowing as businesses experience a negative effect on their cashflow. Premium Credit found that 77% of those surveyed reported that their business cashflow had been negatively affected by stockpiling, with 25% stating it had had a very negative impact on their cashflow. Half of those who reported stockpiling ahead of the March 31st deadline have begun to run down their stockpile levels. Likely in a bid to free up cash. Only 10% reported that they are currently stockpiling new goods in the run up to the new Brexit deadline.
Insurance impact – stockpiling goods and materials means increasing your product holdings. Many, if not all, insurance policies define a sum insured value which you would have agreed when you took out your policy. By increasing your product holdings, you could be leaving your business underinsured if you do not check that you remain within your policy limits.
We know Brexit is on the agenda of all our customers. That is why we have put together our Brexit information page. We’re keeping on top of the latest Brexit news and once we know more about potential insurance related impacts, we will update our webpage. In the meantime, if you are considering stockpiling, or have stockpiled goods and have any questions about your insurance coverage do not hesitate to get in touch with us.