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Lidl's Warning To Suppliers Highlights Their Vulnerability To No-Deal Brexit, Says Analyst

Published on Aug 20 2019 9:17 AM

Lidl's Warning To Suppliers Highlights Their Vulnerability To No-Deal Brexit, Says Analyst

UK supermarkets have been warned several times that a no-deal Brexit is their worst case scenario but Lidl Ireland’s warning to its suppliers on Monday reportedly highlighted another aspect that the chains will have to face, said Fiona Cincotta, senior market analyst at www.cityindex.co.uk.

Cincotta highlighted that the Prime Minister has promised repeatedly that he will cut tariffs on goods coming into the UK, and he will have no influence over what European countries can charge on imports from Britain.

"At present there are no tariffs between the UK and Ireland but on Monday Lidl Ireland told its UK suppliers that it will start charging them the cost of additional tariffs in case there is a no deal Brexit," she said.

"This will also be an issue for other supermarket chains like Tesco which has operations in Ireland, France, the Czech Republic and Slovakia or Marks & Spencer which has over 400 stores in 57 countries, a number of which are dotted across Europe."

Unprepared Chains

Cincotta highlighted that chains are far from unprepared and that the german discount retailer has said that it has been working with outside consultants for the last two years – but the timing and the potentially abrupt nature of Brexit is making their lives increasingly difficult.

"For instance, a major concern has been access to fresh supplies in case of a no-deal Brexit," she added.

Long-life Food Products

She outlined thaty Tesco has stockpiled over £200 million worth of long-life food products ahead of the initial Brexit date in March but then when Brexit was postponed the group sold off the goods and did not build a new stockpile.

"Now with the next potential deadline in October at the very start of the Christmas shopping season Tesco, like other supermarkets, will be focusing on stocking Christmas-related foodstuffs and may not have enough warehousing space to accommodate the stockpiling of long-lasting essentials," she explained.

Tesco has already warned in June that the implications of a disorderly Brexit in October would be significantly worse than had Britain left Europe in March.

"All of the supermarkets have previously warned that disruptions to the supply chain would also have cost implications for consumers and additional tariffs like the ones discussed by Lidl’s Ireland operations would only exacerbate that," said Cincotta.

"In the event of a no-deal Brexit a new tariff regime would come into play according to World Trade Organization rules."

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