UK Companies Rush to Stockpile Bracing for Brexit

UK firms stockpiled raw materials and finished products at a record-high rate in March 2019 as they prepare for the impact of a no-deal Brexit closely looming, according to an IHS Markit and Chartered Institute of Procurement & Supply (CIPS) survey.

RELATED:
Fourth Time’s the Charm? May Ponders Another Bid to Pass Deal

“Businesses on both sides of the channel intensified their efforts this month to accumulate materials with the fastest increase in the stock building of finished goods since 1992, as the U.K. hurtles towards the Brexit deadline,” stated Group Director of CIPS, Duncan Brock.

The Purchasing Managers’ Index (PMI) rose to a 13-month high of 55.1 in March, up from a revised reading of 52.1 in February. Anything above 50.0, the benchmark, represents an increase, which is the case in the U.K for the last 32 months in a row. All in an effort to build safety stocks prior to the separation from the European Union (EU). 

“Manufacturers reported a surge of business activity as companies stepped-up their preparations for potential Brexit-related disruptions,” explained IHS Markit Director, Rob Dobson. Yet this  “panic-buying” influenced positively trends in output and employment (staff-hiring), as new orders and stockpiling operations at clients led to improved inflows of new work and increased rates of business. 

However, companies indicated that future output growth may not be as promising, as the current strong pace of inventory building at both manufacturers and their clients is unwound over the coming year. 

At the same time, raw material shortages, inflationary pressures, Brexit-related uncertainty, and higher energy costs influenced a further increase in average purchase prices during the same month, which manufacturers indicated were passed on to clients in the form of higher selling prices. 

“The big worry is if the threat of uncertainty recedes, businesses will have to resort to heavy discounting on these stocks to free-up valuable operating expenses if normal order levels are not restored in the coming months”, added CIPS’ director. 

Fourth time is no-go for Brexit

As this survey came out, MPs from all parties voted Monday on a second round of "indicative votes”, in a bid to break the impasse. Once again all options were defeated.

The filtered four options included a U.K-wide customs union with the EU, Common Market 2.0, a confirmatory referendum, and revocation of Article 50 to stop Brexit. The alternative that came closest, yet lost by three votes, was the proposal to keep Britain in a customs union with the EU.

That would see the nation remain in the same system of tariffs - taxes - on goods as the rest of the EU - potentially simplifying the issue of the Northern Ireland border, but preventing the U.K. from striking independent trade deals with other countries.

Following the failure of his own motion, the Common Market 2.0, Conservative Party whip, Nick Boles resigned. Some Conservative lawmakers have warned they will support a motion of no confidence if she accepts calls for a Brexit that maintains many of the existing close economic ties with the EU.

With the latest defeat, however, the divorce date is still two weeks away, on April 12, which would leave the nation without a deal.