Home / Knowledge / News / Retail / Retailers may need to alter European supply chains: Fitch

Retailers may need to alter European supply chains: Fitch

19
Jan '21
Pic: Shutterstock
Pic: Shutterstock
Pan-European retailers may need to adapt their supply chains due to the Brexit trade deal, requiring extra investments and expenses, according to Fitch Ratings, which recently said supply disruptions caused by the implementation of new measures will likely lead to loss of revenue for retailers, in some cases temporarily, and some margin compression due to incremental costs.

Supplies to Northern Ireland are subject to a special protocol, which requires additional certifications and administrative procedures.

The Brexit deal keeps trade in goods between the European Union (EU) and the United Kingdom tariff-free, which is a much better outcome for retailers than a no-deal World Trade Organisation (WTO) scenario with tariffs on all trade.

However, any re-exports from UK warehouses of goods produced in third countries are subject to tariffs in the EU. Furthermore, new border checks slow down logistics. Many stores operated by UK retailers in the EU have been experiencing supply shortages since the new deal came into force at the beginning of the year. The most-affected product groups are those with a short shelf life, such as ready meals and some fresh fruit and vegetables.

Some Pan-European retail companies may need to make adjustments to their supply chains to avoid additional tariffs and accelerate the movement of goods, Fitch said in a press release. These may include broadening transportation modes, increasing warehouse capacity in the EU, if not already done so ahead of the Brexit deadline, and finding alternative suppliers.

Northern Ireland applies EU internal market and customs rules, meaning that shipments from mainland UK will soon become subject to new controls. The Northern Ireland protocol envisages a three-month grace period with simplified controls until March 31, so that retailers can adapt their supply chains to the new trading conditions.

Paperwork requirements have already increased and stores in the region have reported supply shortages in January. The heads of the largest UK retailers warned about a potential cliff edge at the end of the grace period when the full range of new rules is enacted. This could affect certain retailers, depending on their presence in both Northern Ireland and the Republic of Ireland, the ratings agency said.

Retailers could experience loss of revenue as a result of supply disruptions, which, however, Fitch expects to be temporary and to ease within several months. Retailers could also incur costs due to emergency measures to reduce supply shortages.

Supply chain adaptation and increased certification requirements could lead to additional expenses and investment needs, although Fitch-rated retailers, especially those operating in the food segment, could accommodate those within their current ratings.

The outlook for the European retail sector is stable, supported by Fitch’s expectations of stable performance in food and improving performance in some non-food segments from the second quarter of 2021, despite logistical and supply disruptions affecting operators with a significant presence in the UK.

Fitch expects revenue dynamics among the segments to begin to converge towards end-2021, assuming the coronavirus starts abating across Europe in the spring, which will contrast with wide lockdown-driven divergences at the height of the pandemic.

Fibre2Fashion News Desk (DS)


Must ReadView All

Pic: Shutterstock

Textiles | On 6th Mar 2021

USTR releases 2021 President’s Trade Agenda, 2020 Annual Report

The Office of the United States Trade Representative recently...

Pic: Jilsander

Fashion | On 6th Mar 2021

Italy's OTB acquires Jil Sander brand from Onward Holdings

Japan's Onward Holdings has announced selling its loss-making Jil...

Pic: Shutterstock

Apparel/Garments | On 6th Mar 2021

Garment industry coalition calls for democracy restoration in Myanmar

A coalition of nine EU and US initiatives linked to the garment,...

Interviews View All

Giovanni Pizzamiglio, Paolo Crespi & Riccardo Robustelli, Epson, For.Tex & F.lli Robustelli

Giovanni Pizzamiglio, Paolo Crespi & Riccardo Robustelli
Epson, For.Tex & F.lli Robustelli

‘The percentage share of printing in the global textile market is pretty...

Nuno Venda, ROQ

Nuno Venda
ROQ

‘There has been an increase in demand for water based inks, rather than...

Textile industry, Head honchos

Textile industry
Head honchos

South India has a very strong manufacturing base

Harssh Chheda,

Harssh Chheda

Mumbai-based Corporate Collars provides bespoke tailoring services for...

Maya Simova,

Maya Simova

Inter Expo and Congress Center (IEC) is a prominent exhibition centre in...

Tina Antoniades,

Tina Antoniades

India-headquartered Lulu & Sky is a rapidly escalating brand with the...

Urs Stalder, Sanitized AG

Urs Stalder
Sanitized AG

Urs Stalder, CEO, Sanitized AG, talks about the increasing use of hygiene...

Silverio Baranzano, Fitesa

Silverio Baranzano
Fitesa

Fitesa is a leader in the nonwoven fabrics industry, specialising in...

Karl Zelik, Vanderbilt University

Karl Zelik
Vanderbilt University

A team of engineers at the Vanderbilt University has designed a smart...

Megha Kumari & Jigar Mali, Label Megha & Jigar

Megha Kumari & Jigar Mali
Label Megha & Jigar

New Delhi based label Megha & Jigar blends India's unique handcrafts...

Sweta Agarwal, A Humming Way

Sweta Agarwal
A Humming Way

A Humming Way (AHW) is inspired by the old-world regalia of Rajasthan...

Suman Nathwani, Suman Nathwani

Suman Nathwani
Suman Nathwani

<span style="font-size: 12px;">Designer <b>Suman Nathwani</b> talks about...

Press Release

Press Release

Letter to Editor

Letter to Editor

RSS Feed

RSS Feed

Submit your press release on


editorial@fibre2fashion.com

Letter To Editor






(Max. 8000 char.)

Search Companies





SEARCH

Leave your Comments


March 2021

Subscribe today and get the latest update on Textiles, Fashion, Apparel and so on.


Advanced Search