Millions tied up in UK catering equipment stocks with 50 days to Brexit

UK-held stocks of European-made catering equipment are understood to be at their highest ever level – and rising – with just 50 days to go until the UK is due to leave the European Union.

Manufacturers believe it is better to tie up cash in surplus stock and take the short-term hit of added storage costs than risk being left without product if Brexit causes major disruption at the ports and borders.

“It is not so much of an issue if you’re a cash-rich company, but if you are a smaller company then you would be worried sick,” said one senior catering equipment source. “It is dead money – it is tied up in stock until you ship it. Okay, it is an asset, but it is still money that is tied up in stock and you can’t liquidate it until you sell it.”

Concerns are mounting that a no-deal Brexit scenario will cause significant chaos for supply chains and yesterday the UK government issued updated guidance on how companies should prepare for changes at the UK border if a no deal EU exit occurs.

James Stewart, head of Brexit at professional services giant KPMG UK, said many of the businesses it is speaking to are “praying” for an extension to Article 50.

“Nearly all larger firms are now preparing for Brexit, after some came late to the party – however the timing of no-deal implementation planning remains highly variable. The chances of some sort of extension or grace period may have increased but prudent firms will keep preparing for no-deal so long as it remains an option.

“At this stage even our most informed clients feel as if anything could happen. They’re thinking about getting products from A to B, market access, and staffing up situation rooms for April. Forecasting the outcome of Brexit is a bit like trying to predict a greyhound race, there are no safe bets.”

The Ali Group is among those keeping a careful watch on the situation. The UK is one of its largest European markets and it owns various businesses that import parts and equipment from French, Italian and German factories.

Its largest subsidiary, AFE Group, said it is maintaining an “open dialogue” regarding the impact of Brexit with all key stakeholders and industry bodies.

In its recently-published financial accounts, it stated: “AFE Group businesses are preparing for the possibility of no agreement and the resultant risk of border delays, customs processing and obligations to comply with any new regulations,” it stated. “We are working with our European and international suppliers in order to maintain continuity of production and supply through increased inventory and warehousing.”

Refrigeration maker Hoshizaki has also “massively” increased its stocks by up to 30% in recent weeks. All its Gram fridges come from Denmark and while its Snowflake range is manufactured in Turkey the products are still channelled through its Danish HQ.

UK managing director, Simon Frost, said: “To give you a better measure, the calculation that is used for stock is 0.7 of a month, it turns that quickly – we will hold a full two months’ worth of stock turn because we have no idea what is going to happen and we can’t run the risk [of running out of product].

All of Hoshizaki’s ice machines and ice dispensers, meanwhile, are built in Telford, but it has still had to raise the level of key componentry such as compressors and augers to prevent any potential hold-ups in production. And in return, its European partners are ordering additional stocks so they aren’t left short.

“Some of our colleagues in Europe have warehousing facilities and they are building up stocks to allow for Brexit, so we are working from both sides to try and alleviate any issues that might arise,” said Mr Frost.

Elsewhere, Certa Catering Equipment, a distributor of induction cooking equipment from French brand Adventys, revealed this week that it has taken on increased warehousing space with Brexit looming.

“It is clear from talking to dealers that supply chain and logistics are two of the biggest concerns that they have surrounding Brexit. We already have these angles covered thanks to our sister company Certa Logistics and we will be drawing on its extensive warehousing facility to accommodate the additional Adventys stock,” explained company director Dan Loria.

Combi oven giant Rational is another company that has begun stockpiling equipment to ensure it can fulfil orders beyond the end of March, which marks a deviation in strategy for the business given it is known for its build-to-order production model.

Managing director, Simon Lohse, confirmed: “We are taking the decision now to enable the plans that we have put in place regarding a possible hard Brexit. If it doesn’t happen it doesn’t happen, but our planning will be in place. We are building up stocks in the UK so that we can make sure that we have continuity of supply, the supply chain is safe and we don’t let customers down.”

Mr Lohse admits that putting stock in place represents a serious investment for the company, but said it was essential to ensure continuity of supply.

“We will have between six and eight weeks’ supply of standard product – obviously if there is need for a non-standard product then that is going to be subject to, manufacturing-wise, a five to seven day lead time but how long the logistics takes we won’t know until after Brexit happens.”

Rational’s annual sales are worth more than £50m in the UK, so even using the most basic calculation, two months’ worth of stock is the equivalent of £8m in revenue. That gives a broad, even if not wholly complete, picture of the sort of financial commitment required to prepare for Brexit disruption.

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