The growing likelihood of a no-deal Brexit is prompting British brands to open distribution centres in mainland Europe, leaving UK warehouse operations under threat.
Fears over tariffs and hard borders in the event of a no-deal Brexit have led many retailers and brands to open new facilities on mainland Europe. Several industry sources have said the shift could result in redundancies in the UK.
“It will have an impact on the UK,” said Adam Mansell, chief executive of the UK Fashion and Textile Association. “If some of the very large brands or retailers decide to ship direct to Europe, then there won’t be jobs in the warehouses. That is a realistic outcome if we face a no-deal Brexit.
“A lot of the big brands have already set up their own European companies with European warehouses, and smaller brands are working with their existing logistics companies to work out shipping to two different locations.”
Northamptonshire-based footwear brand Steptronic is prepared to open a new European distribution centre in Holland should Brexit result in tariffs and delays at ports. The company would maintain its UK warehouse [in Northamptonshire] for national distribution, but it would be downsized, threatening existing jobs.
“I’ve been over and looked at a place [in Holland],” managing director David Corben told Drapers. “Two-thirds of our shoes are sold in Europe and most product comes to England from the Far East to be sent back out again.
“I would only open a distribution centre in Holland if Brexit means we have to, because it could involve laying off people in the UK.”
Another source from a leading UK brand said: “If it’s a hard border, absolutely we will consider our position on our European distribution centres, and it’s high on our priorities. Our European customers are going to expect orders to arrive in good time and that isn’t going to change.”
Holland, Belgium and Germany are preferred locations for companies considering new centres because of their multiple borders, said industry sources.
Naser Matloubi, founder of UK men’s streetwear clothing brand, Arcminute, told Drapers if there was a no-deal Brexit, it would move operations: “If a no-deal Brexit happens then I will open a distribution centre in Germany and send all of my product out from there. I already have contacts sorted to make it happen. It means we won’t be dramatically affected but it’s not good news for the UK for brands to be taking distribution out of the country.”
He also expressed concern about border control and how customs regulations would affect brands travelling to European trade shows.
After her first Brexit deal was rejected by MPs on 15 January, prime minister Theresa May said she would consult companies as part of her Brexit “Plan B” to find the “broadest consensus” on the next stages of negotiations.
Alan Moore, customs manager at supply chain provider Torque, argued that businesses should wait for further clarity on Brexit before investing heavily: “In the case of a hard Brexit, you can’t lose sight of the fact that it’s quite probable that in due course there will be a trade agreement with the European Union anyway.
“Companies could invest a lot of money in infrastructure in European countries that would see them through an initial hard Brexit only to end up with similar trade agreements three months down the line.”
Moore highlighted that companies were also considering other options to avoid heavy duty tax at borders such as customs or bonded warehousing. UK businesses can currently hold imported goods in bonded warehouses without paying any import duty. These goods are then exported to “third countries”, which will include Europe following Brexit.