Demanding Supplies – Supplying Demand

“There will be no downside to Brexit, only a considerable upside” – David Davis, October 2016

“Qu’ils mangent de la brioche” – Apocrypha, commonly attributed to Marie Antoinette

I hesitated to write this article. Why, shall become clear in the reading but the short version of it is that this is not just a sensitive topic but the mere act of talking or writing about it may provoke the negative effects discussed.

The artifact warehouse from Raiders of the Lost Ark.

I am talking about the recent stories that as we enter the “kinetic phase” of Brexit, beyond which any meaningful control of the course can be made, it is looking increasingly likely that the negotiations will conclude without a deal. The UK’s own red lines are insurmountable and are themselves incompatible with the EU’s red lines.

There are a couple of ways that this situation could go. It could either become a “negotiated no deal” where both sides agree that the UK should become a third country with regards to the EU without any trade deals or other favourable access. This would allow a transition period to give both sides time to reorganise.

Alternatively, the UK could ride over the cliff. It could either walk out of negotiations or simply let them time out without a deal. A non-negotiated “No deal” is an entirely passive outcome. It is what will happen if nothing else happens. Every other outcome requires proactive effort on the part of both the UK and the EU to achieve.

And one of the consequences of this kind of no deal is, frankly, a lock down of the ports of entry into the UK as its already completely inadequate customs infrastructure breaks down immediately under the strain of having to check goods coming into the country. Very real fears are being raised that this may lead to shortages of critical goods like food, energy and medications.

The first reason for my hesitation to write this article is that this kind of article is very prone to being dismissed as the kind of “Project Fear” smear we mocked during the 2014 independence referendum (though whilst I have clear memories of Better Together cheerily promoting the idea of price rises post-independence, I cannot remember them ever threatening actual food shortages). I’m also very mindful that this whole thing may well be a carefully orchestrated media coup on the part of the beleaguered UK Government. By feeding out stories of the apocalypse, it may allow the government to ride to the “rescue” with a plan that is merely a catastrophe.

“Don’t complain about your chlorinated chicken. At least it’s food.”

If this is the case, then I may be contributing to this wind up by dint of commenting on it. I very much hope that this will not be the case.

The UK government has been pressured to unveil its plans to keep supply chains running post-Brexit. The problem is. It’s actions so far have suggested that far from keeping its cards close, the government simply doesn’t have any.

The consequences of this are simple. If there is no deal on customs by March 29th 2019 and no transition deal with the EU, then on the 30th of March, the supply chains will seize up. If there is a transition period but the UK is unable to build its contingency plans by then, then on the 1st of January 2021, the supply chains will seize up.

The new Brexit Secretary deputy Brexit Secretary Dominic Raab was asked if the government itself would be stockpiling food and critical medication. His answer was no, but the private sector would be encouraged to do so. He also outlined that in coming months, the government would produce 70 technical documents outlining how people and businesses could prepare themselves. Except…today, news has broken that the government realised that releasing 70 documents over several weeks is like rolling in chum before swimming in the shark tank. Instead, all 70 will be released in one go. Anyone betting that they’ll come out just late enough on a Friday night to miss the Saturday papers? Even if they don’t, there won’t be a news company in the country who could scrutinise that amount of material properly in order to hold the government to account.
(Don’t expect it from me either though I’ll likely give it my best shot)

Stocking Up

The task of stockpiling supplies on this scale is immense. Almost every major distributor of food, medicines – in fact – just about everything operates as close as possible to a “just in time” philosophy. This means that in an ideal world you shouldn’t actually have any stockpiles or stores of anything. If you are on a production line and reach your hand out to pick a component out of a bin, in a pure JIT system, that component shouldn’t arrive in the bin until right before your hand reaches it and the widget you are building should be passed to the next person “just in time” for when THEY need it.

This is a highly efficient system. You don’t need more logistics or tracking systems than you absolutely need and you don’t need to add more steps to your production process than you need. It’s also a much cheaper process to run. Companies don’t need to tie up their working capital in goods that just sit in a warehouse. In terms of highly perishable goods like fresh fruit and vegetables, it also means one doesn’t need to spend huge amounts of money maintaining refrigerated warehouses on a massive scale.

But this is also a very fragile system. When companies like Nissan say that delays of only a few hours can lead to production problems, they really do mean it. Things are often run exactly that tightly. And that’s just thinking about traffic jams at the ports. This isn’t considering the possibility of goods being held up for weeks at customs until the right clearances are given.

I haven’t worked in quite the Nissan type environment, but in my previous life as a laser engineer I did experience the effects of shifts in customs arrangements. I remember well the impact of changing the supplier of one component from an EU source to a non-EU source. The cost in this case was a lot lower but the lead time for orders jumped from 6 days to 6 weeks. JIT meant that we couldn’t order components until we had a build order for the laser they were to be installed in. But these components were fragile enough that a significant percentage of them could not be used. It was a constant source of stress to get systems shipped in time and passing word up the chain that a system may need to be delayed by a month was….never welcome.

Of course, as cool as they are, the lasers I used to build are not a critical, keystone sector of the economy. Food is. Medicine is. And there does not exist in the UK the warehouse capacity to store the volume of goods required for even a couple of days worth of stockpiling. The UK is simply not a country covered in empty warehouses without need. There also does not exist the time to apply for planning permissions, build the warehouses, certify them then lease them out or sell them to companies that might want to stockpile. Not before March 2019. Probably not before December 2020 either.

So, if the supermarkets can’t do it, does that mean that the stockpiling falls to us, the public?

This is the second reason I hesitated to write this article. Because the act of writing it may have consequences. It is not a passive document. People read it and may be affected by it. So I need to tread with great care. I absolutely do not want to encourage panic buying.

The capacity for ordinary people to stockpile goods ahead of Brexit is going to be very limited. To do so means to spend more on food now than they currently do. And too many people in the UK lack the ability to buy adequate food NOW. Too many people have almost no safety net beneath them for unexpected cost increases. Some 25% of UK households have less than £1,000 in cash savings. How much do we need to stockpile? For how long?

And here’s the thing that most news sources have missed in their reporting of this story.

What impact will a massive push of stockpiling have on the economy?

Buy Now, Pay Later

Production of goods isn’t going to magically increase in the coming months. For a start, it’s getting a bit late in the season to plant another harvest before Brexit day…

So any goods stockpiled now are goods which are being bought but are not being consumed now. We’d be increasing demand without increasing supply.

Just about the very first thing taught in economics is that when demand exceeds supply, prices go up. So not only will those who can’t afford to stockpile not be able to. They’ll likely start struggling to pay for what they need now. Add in the chaos of a no deal Brexit and further devaluation of the currency and we’re looking seriously at the situation of those who MOST RELY ON smooth supply chains being the ones who are LEAST ABLE to cope with disruption to them. As Jack Monroe has pointed out, those most able to stockpile are also those most able to jaunt over the channel to avoid the border crash and eat whatever they like.

So where do those who can’t afford to eat turn? Key pro-Brexit MPs will tell you that this why foodbanks are “rather uplifting“. People can go to them, can’t they?

If that thought has ever entered your head then you should read this account by foodbank manager Mark Frankland. Foodbank use in the UK is already spiraling out of control and any further spike is going to crash that system too. Foodbanks are also utterly reliant on the charity of people buying food and donating it to the banks. What’s going to happen to those donations if people are stockpiling for their own use?

Limited Supplies

Here we get to another problem. Many critical goods cannot be practically stockpiled. Fresh fruit and vegetables is one issue but in extremis can probably be substituted for something else one way or the other (though canned goods can be more expensive and less nutritious). Some items may be substitutable with local goods so that whilst consumer choice reduces, goods are still on shelves but remember that things like coffee don’t grow in the UK (nor do haricot beans, for those who vaunt the great “British” baked bean. They’re mostly grown in India, Brazil, China and the USA).

Much more critically, however, is the issue of medication. Whilst the UK does produce a lot of medical goods, it does not produce everything it needs. Prof Tanja Bueltmann has highlighted asthma medication as an example of this where main suppliers to the UK are based in France, Germany and the Netherlands. Again, even if stockpiles can be built and stored – the impact may be higher prices or lower availability now.

And then we get to possibly the most critical problem of all. Some goods cannot be stockpiled.

Certain medications have a very short shelf life. In the case of certain radioactive medications, they must be used within hours of their manufacture and the UK does not have the facilities to build them. If building a warehouse in a rush is tricky. Building a particle accelerator to produce medical isotopes is simply beyond thought. Even if a trade deal can be meted out, the UK’s utterly wrongheaded decision to leave Euratom still leaves this particular problem as a very real risk.

Delivery Charges

Another consideration of this whole issue that I have yet to see discussed is what happens if we do it and then “no deal” doesn’t happen?

If I was the manager of a shipping firm and I was told next month that I needed to start stockpiling, I’d be more than furious if the reason I needed to stockpile didn’t actually happen. As said earlier, stockpiling has a major cost in terms of efficiency and competitiveness. If it is done needlessly, it could well put UK companies at significant risk of damage or collapse even if the Brexit threat does not arise.

This whole endeavour has been the result of successive attempts to fix todays’s problem before tomorrow’s headline without actually considering the consequences in the longer term. Whatever fields of wheat Theresa May has retreated to this summer had better be inspiring ones, because she has to deliver on a lot of solutions very quickly when she returns.

A Shortage of Solutions

Solutions are not something that the UK Government has itself been stockpiling or offering with great supply. The obvious solution would be to stop or delay Brexit until processes were in place and contingencies made. Two years would have been a very tight timetable even if the UK had taken the sensible option of deciding what it wanted for Brexit BEFORE pressing the Article 50 button.

As it is, the UK has placed itself in a situation where it cannot meet all of its own red lines, never mind agree to the EU’s.

Where we go from here is literally anyone’s guess at this point. The UK’s attempts to reassure are going in completely the wrong direction. Even though their specialty IS logistics, sending in the army to “help” with that “reassurance” does not make me happier – especially as this is a disaster precipitated entirely by the UK’s own mismanagement. Dark paths are tread down that road.

I could offer the “sensible Brexit” of the UK asking for EEA status (either as part of EFTA or in a temporary “third party” arrangement), then build the infrastructure required to allow an orderly “hard Brexit” if such is still desired in a decade or so. But I think the Government knows how bad things are and how much worse they’re going to get. I think they know how much public opinion has turned against them now.

A longitudinal Poll of EU sentiment in the UK. Remain is now several points ahead of Leave compared to referendum day.

Even as I finish writing this, reports are coming to me that they want the “no deal” plans sealed under non disclosure agreements to “after warnings that the public would panic and never vote conservative again“.

So much for “Will of the People”. We always knew that Brexit was about Conservative party self-preservation. They’ll happily burn the country to the ground and tell us to be grateful that they are in charge if it means keeping their party together.

Scotland should take note. This is not the vision that even “Better Together” voted for. Even if the Tories somehow navigate us away from this disaster, they’ve shown their priorities. Scotland needs to chart our own course. We need to do it with careful planning, but we need to do it soon. Before it’s too late and we’re dragged to the bottom. Even if the UK avoids the apocalypse this time round. We cannot trust them not to do it again a few years down the road.

The Common Green logo comprising the words "The Common Green" above the Common Weal "balance" icon

Advertisements

5 thoughts on “Demanding Supplies – Supplying Demand

  1. Pingback: Bella Caledonia independence – self-determination – autonomy

  2. Given the firestorms across the world, Brexit might not be the only threat to food supplies. Many harvests are 10-50% down across the world already due to climate change. Australian farmers are suffering severe drought despite it being winter. One farmer was running low on bullets to put his starving sheep out of their misery.
    The good news is blackberry bushes have been prolific out in the wilds round town, which will be good for a few more weeks yet.

    Like

  3. Pingback: As Many As Are Agreed | The Common Green

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.