A perfect storm has hit British retail, resulting in empty shelves, lengthy waiting times and grim warnings from some of the industry’s heavy hitters.
Marks & Spencer last week joined the growing list of retailers to announce it has been forced to shut stores and scale back plans after struggling to keep the shelves filled with fresh food after Brexit.
Blaming “long and complex export processes” following Britain’s departure from the EU, M&S announced it was closing 11 of its stores in France and a reduction of hundreds of lines across its stores.
It follows similar concerns raised by Tesco, Smyths, McDonalds, Ikea, Primark and Iceland, with some warning shoppers of food shortages at Christmas.
When it comes to retail, when Britain sneezes, Ireland catches a cold. So how concerned should we be at this side of the Irish Sea? How secure are our food supplies and are we also facing the prospect of empty shelves?
Mark & Spencer has already said it plans to cut 800 lines in its stores here, including free-range chicken, orchids or goods containing Parmesan Reggiano.
Other superstores are cutting back too on the back of Brexit chaos, a chronic shortage of truck drivers, challenges in global shipping and falling consumer demand.
We may be insulated a bit more here, but the UK driver shortage is aggravating challenges to the Irish supply chain that is attempting to recover after a year and a half of disruption, according to Aidan Flynn, general manager of Freight Transport Association (FTA) Ireland.
“It’s like a perfect storm for the supply chain at the moment.”
Mr Flynn said a long-standing skill shortage in the logistics sector in Ireland coupled to a driver shortage is now coming to a head, resulting in shipping containers missing consignment exchanges between suppliers and hauliers as drivers are not available to handle the goods.
In 2018, in the midst of Brexit negotiations, the FTA identified 30,000 vacancies in the logistics sector, with nearly 30% related to driver positions.
An ageing profession, with the average age of a haulage driver now 50, Mr Flynn said the driver shortage in the UK is not dissimilar to the recruitment challenges facing the Irish logistics sector and other EU nations like France and Germany.
An improving economy in Eastern Europe, especially Poland, has also provided labour market competition for a sector reliant on foreign workers from the region. Nearly 30% of drivers working in the Irish haulage industry are from Eastern Europe, according to Mr Flynn.
Previous reports of supply difficulties have been flagged in the food and drink sector and are now being mirrored in construction and transportation.
For Mike Murphy, a supervisor in Cork City’s Fast Fit tyres, delivery delays have been growing for some time as the economy continues to reopen after the lockdown and consignments from the EU to Ireland getting caught up in Brexit customs checks.
Expecting a week’s delay on some orders for tyres, Mr Murphy said the UK customs process has never been as long before, after the pandemic disruption to supply.
“It’s all piling in now, the last year and a half because of Covid everything slowed down but now with the things picking up it is being held back again.”
Amanda Ratcliffe, a lecturer in retail marketing at the Technological University Dublin, said shoppers here shouldn’t expect to see any food shortages in the categories where we are strong producers such as meat and dairy. However, for baked goods like confectionery, fruit and vegetables, it is likely that we could expect some shortages.
“Much of our food imports from the EU go through the UK landbridge. Whilst logistics operators and companies are gradually putting alternative routes in place, they are longer and more expensive, therefore the landbridge remains the dominant model. Given the current shortage of truck drivers in the UK, that also adds to the problem,” said Ms Ratcliffe.
As we try to secure additional routes to European markers, the UK landbridge is still a vital cog in the Irish export and import wheel.
Supply chain expert Alan Holland,chief executive of Keelver, points out that it's cheaper and faster to use the landbridge so the ferry routes that bypass the UK are a little more expensive and will contribute to inflation.
“Likewise, a greater fraction of our produce is coming from the EU and possibly competitive UK suppliers are being pushed out by the bureaucracy attached to being outside the EU.
“So that also contributes to food price inflation. That said, food inflation has stayed lower than the inflation we're seeing in goods with electronic components. Chip shortages are causing acute problems in such goods so inflation is higher in some other consumer goods categories. Likewise, bulky goods that are reliant on ocean freight are seeing inflationary pressures,” said Mr Holland.
Ibec’s Paul Kelly said while we are not at this stage seeing similar food shortages here, he said the industry is not without its challenges.
“The resilience of the Irish food and drink sector has been shown in the face of Brexit disruption, labour shortages and the Covid-19 pandemic. This has been achieved by companies focusing on employee skills and retention strategies, adjusting supply chains and production processes and on increased automation.
“However, there is a cost to maintaining this level of resilience and we need to see a renewed focus across Government on reducing the cost of doing business in Ireland as well as a rapid roll out to the sector of funding from the Brexit Adjustment Reserve,” he said.
Supermarkets here have been quick to point out that we won’t be seeing extreme food shortages and our supply chains are strong.
Owen Clifford, retail expert with Bank of Ireland said Irish-based supermarkets have robust supply-chains in place and have demonstrated they can absorb market fluctuations as they arise such as the initial Covid-19 related restrictions.
“The UK market has been impacted by Brexit linked to rule of origin paperwork and an exodus of retail and transport workers to the EU. The grocery supply chain is highly sensitive to any fluctuations given the nature of the product and complexity and scale of the store network and the combination of Brexit and Covid-19 has accordingly placed the UK supply chain under immense pressure,” he said.
Mr Clifford points out the majority of Irish retailers have managed Brexit really well.
“Once the political agreement was finalised in December 2020, they mobilised their Brexit strategies, that had been in development for many since 2016, embedded the new regulatory requirements and on-boarded new suppliers in a proactive manner. Whilst there are some challenges, the supply chain has proven robust to date.
“Feedback from retailers is that this additional cost burden has reduced as they have become more familiar with new requirements and, more tellingly, as they shift their reliance from UK-based suppliers to alternative EU locations,” he said.
Supermarkets too are keeping their eyes on the Irish market and have moved to stock more Irish products in recent years. There is certainly a push among many Irish supermarkets to up their game when it comes to stocking Irish products.
Mr Clifford points out that Brexit has been the catalyst for Irish retailers utilising and engaging with more Irish-based suppliers – effectively ‘on-shoring’ their supply-chain.
This is a win-win all round really as it boosts the retailers Irish credentials while consumers are happy to support Irish. It also helps with an overreliance on exporting and reduces tariffs and paperwork linked to avoiding the UK landbridge.
Although there are some really strong home-grown food producers in Ireland we are still reliant on exports for many food items. We import 95% of our flour from the UK, for example which could have knock-on effects for bread supplies. The outlook it seems is that some items are safe, while others will struggle.
Although supply is a priority, shoppers could be in for another shock as prices come under pressure as problems persist. The latest CSO figures show prices in general are up 2.8% over the last year.
When you break it down and focus on food, the figures show overall prices are up a very slight 0.1% over the last year. Not all food prices are up, the likes of meat and egg prices are down but others are on the rise. Bread prices, for example, are up 3.4% in the last year, while breakfast cereal prices are up just over 1%. There were also slight increases in the price of vegetables (0.4%) and soft drinks (2.1%) while the price of crisps is up 3.2% and confectionary products are up 2.7%.
Darragh Cassidy, of consumer website Bonkers.ie said inflationary pressures are definitely building up in the economy.
“It’s mainly being driven by Brexit-related factors and supply chain bottlenecks due to Covid but these should only be temporary. Indeed the longer-term inflation outlook is still quite muted – but in the short term prices are only going one way – up.
In a recent report by ifac, Ireland’s farming, food and agribusiness specialist professional services firm, 71% of respondents reported an increase in costs this year, from transport and energy to raw materials and packaging; an issue – in some cases – that could contribute to food price inflation in the coming months.
David Leydon, head of food and agriBusiness at ifac said: “While it is encouraging that optimism levels have bounced back strongly, trends to watch out for are rising costs, recruitment challenges, negative impacts from Brexit, and lower than ideal R&D investment.
A real missed opportunity is around the strategic planning process – it’s concerning that nearly 80% of SMEs do not have a current strategic plan in place to guide their business.”
Mr Leydon does highlight too that although food shortages are unlikely on the horizon he does expect to see reduced variety.
“If we focus on Ireland, we are already seeing a reduction in the range of products available on shop shelves. One of the key reasons for this is a shortage of people. For example, while there will be plenty of chicken available on shop shelves, you will see less of the value-added chicken, eg marinated chicken, because this takes more resources. This is happening across all categories and as a result supermarkets are simplifying ranges and this will impact choice for consumers.
“In addition to recruitment challenges, the negative impacts from Brexit and Covid-19 are contributing factors.”
Archie Norman, the chair of Marks & Spencer, said keeping supplies flowing for Christmas was going to be a “bumpy ride”. He said items like fresh sandwiches and ready meals going to Ireland are currently being delayed by about a day. It could mean a lot of Christmas tables around the country will have to do without their cauliflower cheese this festive season.
M&S has joined many other household names in issuing warnings. Nandos was forced to close about 40 restaurants temporarily recently when it reported a shortage of chicken supplies while KFC had to take some of its items off their menu. There are issues but many are cautioning against "panic buying".
Supermarkets such as Aldi are also quick to point out that the problems in the UK are not our problems too.
What we may see happening more is businesses deciding to prioritise products with a higher margin. In the long run, this could mean we may not have shortages but we may have less choice on our shelves.