The economic impact of stockpiling goods

Food stockpile
By Eleanor O'Neill, Student Blog

22 April 2019

With worries over supply chains, border controls and access to labour after Brexit, many are turning to stockpiling as a way to prepare for the separation. From the NHS to rural communities, what impact does shoring up supplies have on the economy?

It has been widely reported that the NHS is compiling an inventory of medicine and blood to tide over any shortages that occur from delayed deliveries, increased border control and disrupted supply chains in the immediate aftermath of Brexit. They aren't alone, with pharmaceutical companies including AstraZeneca, Sanofi and Novartis shoring up their stores. Patients have also been stockpiling in response to the threat of slowed distribution.

However, other industries seem more cautious about taking action to expand their stock. The Economist reported that imports have declined as UK companies struggled to anticipate demand for their products in a post-Brexit landscape. Additionally, there is some debate about who should be doing the preparation.

Much of the food supply chain in Britain relies on daily deliveries and a constant flow of goods.

Even big chain supermarkets operate at full storage capacity already - much of the food supply chain in Britain relies on daily deliveries and a constant flow of goods. Over-production and long-term storage would have a massive ripple effect on the industry. Not to mention, there is a shortage of available warehouse space in the UK.

The Welsh NHS has gone as far as to rent warehouses to stockpile essential medical supplies and the UK Warehousing Association (UKWA) warned in January that three-quarters of warehouse owners have no space left and storage costs have risen by 25%.

Most consumer demand revolves around fresh produce that can't be stored long-term and some production processes can't be accelerated due to dependency on factors like crop growth.

Private spam

Some individuals have started their own stockpiles for themselves and their families. Many are viewing this as an extreme measure, while remote communities that lie at the end of existing supply chains consider it a necessity. Indeed, it is likely that fresh produce will be affected first and foremost, and it cannot be stockpiled.

However, it has been pointed out that the ability to stockpile lies almost exclusively with higher income households, who may be the least affected in the long run anyway.

Canned and dried foods are popular with bulk buyers, as are spices, cereals, freezable goods and long-life dairy or dairy replacement products. Common medicines like paracetamol, cough syrup and ibuprofen have also been touted as a good resource to keep on hand.

Higher prices seem inevitable in any scenario.

This practice could eventually evolve into panic buying on a wider scale as indecision over Brexit continues. Past experience tells us that mass purchases in a short amount of time deplete supplies and drive up demand, meaning price increases and worse shortages overall. Remember the barren shelves of the 'Beast from the East' snowstorm?

The UK Government has now employed a consumer analysis firm to track household food and drink trends and identify stockpiling trends as part of overall supply chain assessment. This should enable the development of short and medium-term policies in the event of a no-deal.

Higher prices seem inevitable in any scenario since the pound is likely to take a hit in value, comparable to the sharp decline after 2016's referendum.

That instance saw inflation rise faster than wages to compensate for currency fluctuation, meaning the real income for households was lower than in a healthier economy. Non-essential and luxury purchases decline, which has a widespread negative impact on the whole retail industry.

Topics

  • CA Student blog

Previous Page