Northern Ireland faces Brexit food time bomb on new paperwork

[LONDON] Extra paperwork required by Brexit will raise UK supermarkets' cost of operating in Northern Ireland so much that some may pull out, a trade group warned.

From Jan 1, animal products transported from the rest of Britain will require export health certificates. The forms will cost an estimated 200 pounds (S$357) per product, according to the Northern Ireland Retail Consortium. With a refrigerated truck typically carrying about 200 different lines, the requirement could add 40,000 pounds to the cost of every shipment across the Irish Sea.

It's a problem for most grocers, ranging from Tesco Plc to Marks & Spencer Group Plc, because much of the stock in their Northern Irish stores comes from the rest of the UK. With profit margins already slender, the higher costs could prompt some retailers to turn their back on the province.

"If something starts costing you money rather than making you money, then it doesn't make sense to continue with an unviable business model, does it?" said Aodhan Connolly, director of the retail consortium. Increased grocery prices in the region would hit a population with higher levels of debt and lower levels of saving and discretionary income than the rest of the UK, he said.

The group is pushing for the European Union and UK to set up a "trusted traders" program to simplify the process. That would create a certified, auditable fast-track system for goods to flow into the province with the same ease they do today.

The added paperwork is necessary because Northern Ireland will be bound by the EU's customs rules after Dec 31, meaning it will have to apply the bloc's standards on animal health while the rest of the UK will not. British firms will also have to contend with customs declarations and the risk of delays, adding costs.

According to Logistics UK, 425,166 trucks traveled into Northern Ireland from Great Britain last year. The trade group estimates about 65 per cent of the 10.5 billion pounds of imports go to local wholesale and retail businesses, meaning the vast majority of these trucks are carrying food and other consumer goods.

Small Market

The small size of Northern Ireland's market -- just 1.9 million consumers -- means it isn't practical to send trucks containing large amounts of a single product, even if that would be cheaper.

Tesco, the biggest grocer in Northern Ireland, said in a statement that it remains committed to the province and "will continue to ensure we can operate effectively for our customers, colleagues and suppliers."

A Marks & Spencer representative said: "M&S has operated in Northern Ireland for over 50 years, we have a great business there and we remain committed to serving our loyal customers."

In addition to possible pullouts from the market, other options for UK supermarkets include raising prices or limiting the ranges they offer customers, said Clive Black, a retail analyst at Shore Capital Group Ltd.

"This is a potential total and utter cataclysmic disaster for the Northern Irish economy and consumers," he said. "The viability of the grocery industry in Northern Ireland is now in question, which could have a knock-on impact on pricing and choice for the Northern Irish consumer."

BLOOMBERG

KEYWORDS IN THIS ARTICLE

BT is now on Telegram!

For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes