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Trade fears over 'disruptive' coronavirus

UK retailers and suppliers fear the coronavirus outbreak could cause “severe disruption” to trade.

Last night, the World Health Organization declared the respiratory illness a global emergency. As the outbreak continues to spread across China, at least 213 people in the country have died from the virus, and there have been almost 10,000 cases nationally. There have been a further 98 cases of the virus detected in another 18 countries, and two people have tested positive in the UK.

Earlier this week, British Airways suspended flights to mainland China from the UK. Meanwhile, several retail businesses are scrambling to close down operations in the country, among them H&M Group, Amazon and Apple.

H&M’s head of investor relations Nils Vinge told Drapers the virus is a concern: “We have stores in China. We work very close to the authorities and local teams, and in some cases, we’ve had to close stores.

“We do some sourcing in China, too, but not many suppliers were shut down. It’s something we are monitoring very closely.”

Several suppliers have expressed concern over potential supply chain disruption.

“The virus is definitely something to worry about,” said one UK footwear supplier. “I do believe there will be an effect on trade as so much comes from China. How can there not be?

“We also have to ensure that this virus is controlled, so closing factories is going to happen. As such, there will be an effect on goods being produced and I am afraid we are going to have to deal with this throughout the world.”

Another UK footwear supplier agreed: “Outside of the human impact and suffering, I think the virus has the potential to cause severe disruption and to impact trade.

“Many companies have stopped all travel to China for the foreseeable future. This will have a negative effect on product development and sourcing. It also has the possibly of delaying post-Chinese New Year shipments.”

He added that tourist spend in the UK could also be affected: “The UK is a hotspot for Chinese tourists, and many of London’s stores and department stores rely on tourism.

“With the Chinese quarantine zones in place and major airlines cancelling flights to Europe, along with the fact the virus is spreading, I’m sure we will see fewer travellers which, in turn, will mean less spending.”

Simon Cotton, CEO of Johnstons of Elgin, is also worried about a potential drop in Chinese tourism spend: “We are concerned about the impact on business around the world, and have already had to cancel or delay trips to China on both the sales and buying side. Clearly, the desire to keep all of our staff safe is our first priority.

“Chinese consumers are critically important to many of the brands we supply, our retail customers and our own retail operations. In the period since the SARS virus [in 2002-2003], the number of international Chinese shoppers and the importance of their spend all around the world has grown dramatically.

“It remains to be seen how much of that spend will simply be lost and how much will be displaced to purchases via [app] WeChat and on-line stores.”

Paul Alger, international business director at the UK Fashion and Textile Association, said there is a “risk of disruption” to businesses exporting and importing to China: “UKFT continues to keep a close eye on developments on the spread of the latest coronavirus from China. Unfortunately, no one can predict how and how quickly it will spread, but February and March could be the peak periods.”

He added: “Depending on the strength of the virus when it reaches our shores, there is clearly a risk of disruption to daily business, public transportation, and so on.

“It is worth checking the World Health Organization website at who.int, and UKFT’s advice to business is to be prepared by reinforcing hygiene measures in the workplace and ensuring they have adequate ‘stay at home’ plans in case key workers are unable to travel to work for extended periods. Employers may also have to prepare contingencies in case key workers have to remain at home and cannot travel.”

The China-Britain Business Council declined to comment.

 

Readers' comments (1)

  • Given that the number of Coronavirus cases worldwide has overtaken that of the Sars epidemic, which spread to more than two dozen countries in 2003, the economic effects of the Coronavirus should not be understated. Fashion brands and retailers which have any connection with China can expect to feel some impact.

    This will not be limited to imports to the UK given that the Lunar New Year holiday has been extended by the PRC government. Nor to a drop in the number of Chinese tourists visiting the UK and their consequent spend instore. As more cities in China are quarantined, those businesses with their own stores or franchised units or selling via the likes of Alibaba.com are also likely to see a reduction in turnover.

    It follows that we can expect to see references to the Coronavirus when financial updates are given. Similarly some businesses may look to the force majeure clauses in their contracts to check if such clauses may assist them in the circumstances.

    Stephen Sidkin
    Chair
    Fashion Law Group
    Fox Williams LLP

    Unsuitable or offensive? Report this comment

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