With the delay of Brexit now pushed further down the line until October 2019 and no proper withdrawal agreement in place, businesses around the UK are trying to prepare for the possibility of a no deal Brexit.
Border uncertainty has businesses concerned about a possible increase in import taxes. And in response, many have begun stockpiling materials and goods in attempts to decrease their risk. In fact, a survey revealed that over 40% of organisations have a Brexit contingency plan that involves stockpiling.1 Stockpiling was reported as a worry in 1999 when businesses were concerned about the Millennium bug taking down IT services. That year, businesses were looking to increase stocks by 12.5% - just in case.2
It’s been reported that one of the UK’s biggest building contractors has purchased over £500k in metal to protect against a potential price increase resulting from a no-Brexit deal. While another contractor is storing bricks among other materials to help ensure projects don’t run out of supplies.3
The risks of stockpiling
While this may seem like a reasonable cautionary tactic, stockpiling can in fact carry its own risks, including leaving you financially vulnerable and causing storage issues. So what can you do to avoid your stockpiling becoming a problem rather than a solution? Consider these tips to ensure your stockpiling procedures don’t result in disaster:
Be money smart, don’t purchase excessively
Having extra stock in your warehouses might be a good idea for the future, but in the meantime, it’s dead money until you have the demand to use it. It’s risky to invest so much into stock you might not use for months, or even years. It could put your business in a financially unstable position - the worst case scenario being you have to cease trading. It’ll be a challenge, but finding the balance between stock, finances and predicted demand/supply could be key to your business’ survival.
Rethink your storage processes
Consider the quantities of stock you would normally hold. By increasing the amount, you could increase the risk of these items being stored in hazardous or unsafe conditions. You mightn’t have ever held stock in these locations before. With this in mind, it’s vital to assess your storage space and procedures to ensure proper risk controls are in place. Don’t forget to make sure all health and safety standards along with your insurance conditions and warranties have been met in order to use the space too.
Increase security measures
Stockpiling could increase the risk of theft. Bulk storing valuable goods such as electrical components or cabling might make you more attractive to thieves. Consider what security measures you can take to help prevent break-ins and prevent your valuable stock being stolen. Whether that involves guards, security cameras or access barriers - be sure to make it as difficult as possible for thieves to steal from you.
Let your broker know
Stockpiling can lead to major concerns with your insurance cover should you make a claim. If it is necessary to stockpile, make sure you tell your broker your intentions and actions. They’ll need to update your policy and increase the sums insured. You might find that your policy is subject to certain limits; meaning that you may need to change your policy in order to protect the value of your items. If you fail to update your policy then any additional stock may not be covered, leaving you with a potentially significant financial loss in the event of a claim.
Whatever your thoughts or plans are for stockpiling, talk to your suppliers and brokers about any concerns you have. They might be able to assure you that your fears needn’t be as big as they seem, or give advice to keep your business protected. An honest conversation and checking back with them if there’s a change of circumstances; be all you need to get your stock levels right and keep your business adequately insured.