Firms could stockpile goods worth £40bn for no-deal Brexit

10 September 2018

Companies could be preparing to stockpile nearly £40bn of goods to combat a no-deal Brexit, according to a think tank.

The economic effects of the build-up and subsequent running down of inventory either side of the 29 March exit date could cause a mini recession in the final three quarters of 2019, it said.

The Centre for Economics and Business Research (CEBR) calculated that if companies stockpiled three month’s worth of raw materials and semi manufactures usually imported from the EU, plus one month’s worth of finished manufactures, it would amount to £38bn in additional imports before 29 March.

Though the imports would not contribute to GDP themselves, their associated production and processing would, it said, at around one-quarter of their value or 0.5% of GDP.

But this trade would be “reduced by an equivalent amount” for the rest of 2019. “This makes a mini recession almost inevitable,” said Douglas McWilliams, founder of the CEBR, in a blog.

Government papers on the effects of a no-deal Brexit published in August highlighted potential disruptions to medical supplies and food.

Pro-EU campaign group Best for Britain also warned the bill for stockpiling medicines, in line with health secretary Matt Hancock's recommendations set out in a letter to healthcare providers, could be as much as £2bn.

But CEBR said the largest cause of disruption would “undoubtedly” be raw materials such as chemicals and semi-manufactures such as car and aircraft components. Of the £260bn of goods imported from the EU last year about £100bn fall into these two categories.

The think tank said there was already evidence of stockpiling, with inventories rising in the second quarter of this year at a greater rate than GDP, although it is unclear whether this is because of Brexit.

Figures released today by the Office for National Statistics indicate that goods imports from the EU increased more than those from non-EU countries over the last year.

Goods imports from the EU have increased by £10.9bn in the 12 months to July 2018 compared with the previous year, while they have only grown by £3.9bn for countries outside the European Union.

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