Beyond Brexit: are restaurant supply chains ready for no deal?

Recent reports analysing the prospects for the hospitality sector in the wake of a no-deal Brexit paint a grim picture. According to recent economic estimates by MCA Insight​​, a ‘disruptive’ no deal Brexit will slash at least £3.4bn off the value of the UK’s eating out market in 2020, and a ‘disorderly’ no deal Brexit could reduce it by £5.4bn; to rub salt in the wound, economic estimates also show that the market has already lost £1.4bn in value as a result of the Brexit vote. And now, thanks to the installation of Boris Johnson in Number 10, the prospect of Britain leaving the EU without a deal on 31 October is very real.

A slow-down in turnover is one of a number of Brexit-related concerns facing UK hospitality operators, alongside staff retention and, of course, fears over a breakdown in supply chains. Tim Lang, professor of food policy at City University, recently wrote a paper​​ on the impact a no-deal Brexit would have on the UKfood supply suggesting the government is deliberately keeping details of potential food shortages, limits, and transport delays out of its public Brexit planning strategy.

“The situation is worrying,” he wrote in medical journal The Lancet. “The UK state is reverting to its default positions of centralisation and planning secrecy that are reminiscent of what [economist] William Beveridge called, after World War 1, top-down ‘food control’.”

Lang’s alarm has been echoed by many in the industry. “The prospect of a no-deal Brexit is of significant concern,” says Monika Linton, founder of Brindisa; the London-based Spanish foods supplier and restaurant group. “The general feeling amongst many of our customers is that they are tired of Brexit and the confusion over what is happening.”

Stockpiling​

Linton has been preparing for the possibility of a no-deal Brexit for some time by stockpiling ambient lines. “We did this back in March when we originally thought we’d be leaving the EU, and will be doing so again,” she says. “The difference now, though, is that, as it will be close to Christmas, we must stockpile greater amounts.” She adds that the accumulative build-up of stock has meant having to hire third party warehouse space, which has led to additional logistical costs.

Stockpiling could help cushion the initial blow of no deal, which could potentially lead to delays on both sides of the border, but it certainly isn’t a long-term solution.

“We’ve reassured customers that we will do everything in our power to avoid disruption to the supply of goods to them,” says Linton.  “Stockpiling means we will be able to maintain a steady supply, but we can’t guarantee being able to sustain this in the long run.”

Pizza Pilgrims co-founder James Elliot says stockpiling is not currently part of the plan for his 10-strong pizza chain. “Our approach to Brexit has always been that we don’t know what we don’t know,” he says. “Other than tomatoes and flour, there aren’t that many things we can stockpile as we predominately use fresh produce. Like a lot of companies our size, we’ve secured our pricing for the next 12 months with our supplier. The price of mozzarella, for example, did go up but this has been mitigated by the fact that we are a growing business and our volumes are increasing.”

Concerns over the supply of goods is only part of the problem. Linton also cites uncertainty over exchange rates leading to potential price increases, with no-deal Brexit likely to make the pound plummet ever further. There’s also the possibility of higher product costs to account for both changes to the exchange rate and expenses that stem from transport issues.

“We are working hard to understand the granular detail of our costs, from raw materials to transport, storage, processing and packaging. Some of these will be affected by Brexit, but the majority remain in our control; so through controlling them tightly we may be able to stabilise costs.”

So what’s the solution? Linton says that the government’s advice, available through the HMRC website, provides little clarity, and that the key to weathering the storm will be maintaining solid relationships between restaurants and suppliers. She also suggests that more restaurants may try to circumvent possible disruption of fresh produce from abroad by sourcing locally; though adds that the UK’s limited agricultural output means imports will still be needed.

No easy answers​

Luckily, more and more restaurants are already sourcing fresh produce from the UK. “Across the industry we used to be reliant on bringing in tones of product from Europe as it wasn’t available in the UK, but that’s changed now,” says Paul O'Shaughnessy, purchasing director for high-end restaurant group D&D London, which operates more than 30 sites in the UK. “These days there’s a want to take the miles out of food and put more emphasis on a model that’s sustainable, and that’s what we’re trying to move to.”

O'Shaughnessy adds that much of the group’s preparation for a prospective no-deal Brexit has involved placing much of its onus on the suppliers with suggestions that as well as guaranteeing stock, there will also be moves made to circumvent conventional European trade routes in order to ensure a continued flow of produce; for example, importing via Rotterdam rather than northern France. Beyond that, however, the focus will be on sourcing supplies from closer to home.

“One of the keys to our approach has been taking a step back and looking at our brand,” he continues. “Our intention has been to look at sourcing more produce from the UK and putting a greater emphasis on seasonality. And as a result, we may have to change our menus to reflect this.”

O'Shaughnessy is confident that pushing the brand towards using more seasonal UK produce will help most of D&D London’s sites weather the approaching Brexit storm, but says the challenge will be ensuring the same security for the group’s restaurants that are committed to EU-sourced ingredients, such as its three Italian restaurants, which are overseen by Francesco Mazzei. “At the moment we believe it’s authentic restaurants that rely on offering diners an authentic experience that are facing the greatest threat,” he adds, gravely.

However, Lang’s paper suggests restaurants won’t necessarily be able to rely on British produce. “November is at the end of the UK agricultural growing season, so the availability of domestic produce will decline,” he wrote, adding that in terms of imports the UK government’s current planning assumption is that at least half the trucks entering the country might be unable to have smooth border transit. If this were to happen, the flow of trucks through the main UK ports could drop by more than a third within one day of a no-deal Brexit. “If this level of disruption continued for two to three months,” he concludes, “the effects would be unprecedented in peace time”.