Stockpiling for Brexit? Make sure you’re insured.

20th February, 2019

Many UK businesses are stockpiling against the prospect of a no-deal Brexit, with the ensuing border gridlock and supply chain disruption. While increased stocks may ease the situation, under-insurance could be a problem if companies fail to notify insurers about changes in stock levels and location.

Stockpiling amongst UK companies has reached the highest level on record for a major advanced economy. According to IHS Markit and the Chartered Institute of Procurement and Supply, closely monitored by the Bank of England and Treasury, in January, British factories raised stocks at the fastest pace since records began in the 1990s.

Japanese car manufacturer, Honda, is preparing to front-load production in order to ship vehicles abroad before Brexit and build up stocks in Britain. Jaguar LandRover, which requires as many as 25m separate parts a day, has begun stockpiling, and BMW plans to close its Mini plant for a month after Brexit due to fears over parts shortages.

Siemens UK has started increasing supplies of critical components used on the railways and in food processing plants. Unilever is stockpiling Magnum ice creams, and Tesco and Marks & Spencer are increasing stocks of canned food. WH Smith is stockpiling six months’ worth of notebooks, diaries and pens, and Brompton Bicycle has built up £1m of bike parts.

The rush to stock pile raw materials, components and finished goods is a sure sign of the unique risks facing the UK in the event of a hard Brexit. Chief International Economist at City bank ING, James Knightley, said: “ Manufacturing is so reliant on complex supply chains that precautionary inventory building is a necessity.”

According to the HIS Markit/Cips survey, stockpiling is most evident among food and drinks firms, as well as businesses in the clothing, chemicals and electronics sectors. Given the limited shelf-life of fresh produce, food manufacturers will find it tougher to stockpile goods, and there are already reports that the UK is running out of warehousing space, with frozen and chilled food warehouses fully booked for six months and customers being turned away.

With so many companies opting to stockpile as a means of countering the effects of a no-deal Brexit, there are other implications to consider, such as insurance. As with any policy, stock insurance has conditions you need to follow to ensure it remains valid. For example, you need to tell your insurer if your stock levels grow in value or quantity, if your stock needs to stored in a certain way or if the location changes where your stock is stored or sold.

If you are increasing stock levels due to concerns over Brexit or otherwise, please check with Routen Chaplin about the terms of your policy. Underinsurance could prove costly or your policy could be invalidated. Call us today and we will be happy to advise.

Sources:
https://www.theguardian.com/business/2019/feb/01/uk-manufacturers-stockpiling-for-no-deal-brexit-hit-record-levels

https://www.makeitcheaper.com/business-insurance/stock-insurance Allianz Risk Barometer:Top Business Risks for 2019