Lidl Ireland's warnings to UK suppliers that it will start charging them the cost of additional tariffs in the event of a no-deal Brexit indicates the challenge that awaits British operators should the country leave the EU without a deal in October, a leading retail analyst has said.
Fiona Cincotta at www.cityindex.co.uk was commenting following the news that Lidl's Irish operation has contacted its UK-based suppliers to notify them that their contracts with the discounter contain a DDP ('delivered duty paid') clause, and that they would be liable to pay tariffs should any occur.
Should a no-deal Brexit occur, tariffs would be subject to World Trade Organization (WTO) rules, which would likely lead to significant cost increases for suppliers, and challenges for retailers with operations outside of the UK.
'No Influence'
"While the Prime Minister has promised repeatedly that he will cut tariffs on goods coming into the UK he will have no influence over what European countries can charge on imports from Britain," Cincotta wrote in a briefing note.
"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. 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."
Cincotta noted that the timing and potentially abrupt nature of Brexit is making planning difficult, with particular concern over the future viability of fresh food supplies should a no-deal scenario emerge.
Stockpiling Issues
"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," she said.
"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."
Previously, Tesco chief executive Dave Lewis warned that a disorderly Brexit in October would be significantly more difficult to plan for, due to the Christmas planning period, and a lack of available warehouse space.
"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. In the event of a no-deal Brexit a new tariff regime would come into play according to World Trade Organisation rules," Cincotta said.
© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.
