No-deal Brexit uncertainty forces UK producers to plan factory shutdowns

Companies rushed to stockpile goods from producers earlier this year amid fears of a no-deal Brexit.
Now those companies have excess stock leading to a collapse in sales for UK producers.
Factory workers are being left to sweep floors and clean machinery due to a lack of orders, industry figures have told Business Insider.
UK companies are weighing up fresh no-deal Brexit planning as the October 31 deadline looms.

LONDON British companies have drawn up plans to temporarily close factories after demand for their goods nose-dived following Theresa May's decision to delay Brexit, senior industry figures have told Business Insider

Producers have seen production levels collapse due to what one industry chief called the "stop-start" Brexit effect.

Fears of a no-deal Brexit in March and April led many companies to build up large stockpiles of goods. As a result, production of some goods, including foodstuffs and raw materials, has now all but halted in some factories.

One popular ingredients producer based in the United Kingdom, which does not wish to be identified, has seen its sales plummet since the decision was made in April to delay Brexit until the end of October.

This leading producer is now considering temporarily shutting down its factory, industry figures told Business Insider, with its workers having little to do other than sweep the floors and clean machinery.

Other UK producers face a similar dilemma of how to deal with the sharp decline in demand.

One industry figure told Business Insider this week: "In April and May there were lots of companies with time on their hands. They say they have the cleanest factories you have ever seen.

[There are] lots of companies with time on their hands. They say they have the cleanest factories you have ever seen.

"This stop-start process is not a great way to run a business."

The rush to stockpile among manufacturers ahead of a potential no-deal Brexit in the Spring helped fuel a 0.5% rise in the UK's GDP in the first three months of 2019, the British Chamber of Commerce (BCC) said .

However, the decision of May and other EU leaders to delay Brexit by six months triggered a sharp drop in sales for UK producers, triggering forecasts of lower growth in the second half of this year.

"It is increasingly likely that the temporary boost from historically high stockpiling in the first quarter, which has marginally improved the growth outlook for this year, will be surpassed over the medium-term by the negative impact from the running down of these inventories," Suren Thiru, the BCC's head of economics, told the BBC.

No-deal Brexit panic

Pallets Brexit Matthew Horwood/Getty Images

She added: "Businesses and their employees have been warning about this for a long time. There's a reason most Brits now want to stop Brexit. It's not working."

The slowdown comes amid growing fears of a no-deal Brexit in October, following the opening of the race to replace May as Conservative Party leader and prime minister. Several of the leading candidates, including frontrunner Boris Johnson have insisted that they will take the UK out of the EU on October 31, with or without a deal.

However, while UK industry was relatively prepared for a no-deal exit in March, such preparations would be significantly more difficult later this year.

Business Insider reported in April that UK companies were struggling to find warehouse space to stockpile goods in preparation for an October no-deal due to warehouses already being booked up to prepare for the Christmas period.

Much of the warehouse space previously allocated to cope with a no-deal Brexit at the end of March, is now unavailable for a no-deal exit on October 31, with much of it booked up to three years in advance.

One business leader familiar with the no-deal plans of British retailers said that one major food company had used warehouses to stockpile around 24,000 pallets of stock in the run-up to a potential no-deal exit in the spring.

However, none of this space is available at the end of the year.

They told Business Insider that warehousing space is "at maximum capacity over Christmas in any normal year," and that the risk of a no-deal Brexit in October was creating demand for additional space which does not exist.

"Christmas is already a difficult period... Brexit is a pain in the arse which has f***** everything up even more."

Got a tip? Email this reporter at apayne@businessinsider.com and send him a direct message on Twitter at @adampayne26.

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