As the two remaining candidates for the Conservative Party leadership both pledge to leave the EU on October 31 come what may, retailers are growing increasingly anxious about the Halloween deadline.

Boris Johnson and Jeremy Hunt – one of which will succeed Theresa May as prime minister later this month – have both vowed to deliver Brexit by the autumn cut-off in the wake of two previous delays.

But it is a thought that has struck fear into business leaders. Last week, Sainsbury’s chief executive Mike Coupe lambasted the Brexit deadline, saying it was “about as bad as it gets” for retailers.

“You couldn’t choose a worse date,” he said. “The timing, as in October 31, is bang in the centre of when we are gearing up our supply chains and our stocking for all of the main Christmas events – Black Friday and then the main Christmas trading season.”

“You can’t plan for this period. The golden quarter is half the year’s turnover. Even if you manage to get 90% of your stock in on time, the other 10% is crucial too”

Gary Grant, The Entertainer

Coupe also cautioned that a potential no-deal Brexit and the loss of trading agreements could make it difficult for retailers to import goods such as toys and technology, creating a “potentially disruptive” Christmas for families across the UK.

His words echoed the concerns raised by Tesco boss Dave Lewis last month. The man at the helm of Britain’s biggest retailer warned that stockpiling would be more problematic ahead of the golden quarter than it was back in March when Britain originally planned to leave the EU. 

“October, from a retail point of view, will be much more challenging than March was,” Lewis said. “We come out of a very busy Halloween period in October and we would be building stock for the Christmas peak. The capacity in the supply chain in the UK will be more challenged in October than it was in March.”

Such fears around Brexit-induced logistical nightmares at a time when supply chains are at peak capacity have been compounded by the high stakes of the golden quarter – itself already more perilous than normal as political and economic uncertainty swirls and consumer confidence remains fragile.

“As a retailer, the end of October couldn’t be more critical,” says The Entertainer’s founder and chief executive, Gary Grant. “When we thought it was the end of March, we could plan for disruption in distribution and stock.

“You can’t plan for this period. The golden quarter is half the year’s turnover. Even if you manage to get 90% of your stock in on time, the other 10% is crucial too.”

Stockpiling

The delay of the Brexit date, from March to May and then to October, could, though, be a help as well as a hindrance for retailers attempting to navigate trading beyond the departure date.

“We’ve already marched up the hill twice, in March and May, so in that sense, we are at least a little bit more practised in some of the actions we would take,” Coupe said.

John Lewis Cheltenham

JLP has ‘stockpiled cash’ in the run-up to Brexit

Tesco stockpiled over £200m worth of long-life food products for the end of March to help it cope with any disruptions in the supply chain, so it too could potentially learn lessons ahead of October. It has now sold down that excess stock but has not yet recommenced stockpiling ahead of October 31. 

Grocery rival Waitrose & Partners has hinted it plans to do that, despite the lack of spare supply chain capacity.

The upmarket grocer’s managing director, Rob Collins, says: “No question, it is a more challenging [Brexit date] than March, but we will do what we did then insofar as taking pragmatic steps. We increased stocks in a way that was sensible.”

The John Lewis Partnership has hoarded another resource in the run-up to Brexit, too. JLP has, in group finance director Patrick Lewis’ words, “stockpiled cash” to help it weather any Brexit-related slowdown.

It has increased liquidity from £1bn in 2017, when it saw which way the wind was blowing regarding Brexit, to £1.5bn today. This will give the business the flexibility to weather the potential storm sparked by a loss of golden quarter sales or to shore up its supply chain. 

Shipping forecast

Many businesses do not, of course, have this advantage. For many, the question of how disruptive, and consequently dangerous, Brexit could be to trading depends on which sector they are operating in.

For grocers, with 79% of the food they import coming from the EU, the prospect of a disrupted supply chain could result in festive food rotting at ports if more stringent border checks are introduced.

While other sectors are unlikely to be affected as severely as the supermarkets by a Halloween Brexit, the extent to which trading is disrupted depends hugely on shipping routes.

“We need to be a little more nuanced on how we speak about disruption to stock. I cannot see that many problems arising for fashion retail”

John Bason, ABF

“We are looking at it a little differently from the grocers,” says John Bason, finance director of Primark parent company Associated British Foods.

“The supply chain for clothing is not dependent on the EU. For Primark, sales to the eurozone go straight from countries we source from to the countries we sell to and our UK stock does not go through the eurozone.

“We need to be a little more nuanced on how we speak about disruption to stock. I cannot see that many problems arising for fashion retail.”

The boss of one mid-sized fashion retailer disagrees, however.

“If you are a fashion business with a huge last-quarter focus, which probably means very accessories-focused, then it’s a huge issue.

“We are not as supply chain-oriented as food businesses, but if there is no stock coming in during November, it will hurt more than it would in April. October and November are most fashion retailers’ bestselling months.”

Grant agrees with Bason that stock from further afield than Europe will not face significant disruption, but says any obstacles delaying or preventing goods moving in and out of Europe will be damaging to the toy sector.

“We do not think there will be a huge impact on the container ports from countries such as China. That is well oiled,” he says. “But the cost and time for products flowing to and from Europe could mount up.”

Stock shortages

As most toys are made in eastern Asia, Grant does not believe a shortage of toys at Christmas is a likely outcome. But he warns if “customs does go into a meltdown” then stock shortages could be possible.

“Christmas is a day, not a period of time,” Grant says. “Getting stock on December 29 means that you have missed Christmas. But the bigger danger is in potential tariffs, which will mean either an increase in price or dilution of margin.”

Grant adds that the business has found it incredibly difficult to plan for Brexit, even with a dedicated team in place, and urges the next prime minister to deliver some certainty as soon as possible. 

“Our senior management has been plotting our response to certain situations,” he says. “And we have a project team working through scenarios, but we just don’t know what is going to happen. If I knew for certain what Brexit would look like, I could plan for it, but at the moment there is so much speculation.”

“There will be a short-term fillip, as people are so fed up with this. A lot of people are desperate for a resolution of any sort. But it will be short-lived – and then what?”

Richard Hyman, RAH Advisory

Retailers have long voiced such concerns that it is extremely difficult to mitigate any consequences when it is still unclear what Brexit will look like. Businesses that are strong and have plenty of cash, such as John Lewis, are at an advantage, but businesses in a weaker position could find it very challenging to respond appropriately to any fallout.

One scenario retailers certainly cannot plan for is the consumer reaction to Brexit, whatever form it ultimately takes. Consumer confidence has been shaky at best since the referendum in 2016.

RAH Advisory founder Richard Hyman believes a final resolution to the Brexit question may boost the UK’s mood – although he has a caveat.

“There will be a short-term fillip, as people are so fed up with this. A lot of people are desperate for a resolution of any sort. But it will be short-lived – and then what?”

For retailers, a Halloween Brexit could be just the start of a more prolonged nightmare.