Finnish supermarkets are making contingency plans for Britain leaving the EU without a deal in place for future trade relations.
It means possible disruptions in supply chains for imported food and drinks; price increases as added taxes and customs fees are passed on to shoppers; or some items disappearing completely if retailers think they’ve become just too expensive.
Britain is set to quit the European Union in less than 140 days and the two sides have so far failed to reach an agreement about what happens after 29th March 2019.
Although Britain’s Prime Minister Theresa May says a deal is getting close, fighting within her own party and also in her government, which has been plagued with high profile resignations and instability, means that any deal on the table might not even get approved by the British parliament.
Finnish supermarkets are already looking ahead at what happens if there’s a no-deal divorce.
S-Group planning for problems
One of the country’s biggest food retailers S-Group has been looking ahead to potential Brexit problems for some time.
With almost 900 stores throughout Finland, S-Group imports some €100 million worth of food, drinks and non-food products from the UK every year for sale in their Alepa, S-Market, Prisma and Sale stores; as well as Stockmann Herkku delicatessen.
On their list of possible scenarios – as best they can predict – a ‘hard Brexit’ with no transition deal which means World Trade Organisation tariffs would be applied to food and drinks coming from Britain to Finland.
“The situation is that WTO duties which is that kind of third country duty on food varies from 6% to 24%. It can be very high, when today it is duty free. We are studying, together with our suppliers what would happen if there would be a hard Brexit” says Jari Simolin, S-Group’s Senior Vice President for Retail Sourcing, who has been working closely on Brexit-related issues.
Those increased costs would almost certainly be passed on to customers, although if some margins were too high, S-Group could simply decide not to stock specific British products if they don’t think shoppers will pay the extra money.
“There are a lot of British suppliers which only have manufacturing in the UK, and naturally the cost element of these prices will increase because of duties and clearance procedures that will have an effect on consumer prices. Are consumers willing to pay 20% more on products? In some cases yes, but in most cases probably not” explains Simolin.
Imported products from the UK
If you’re wondering what items in your local supermarket or Alko stores might come from the UK, it covers a whole range of goods from premium spirits, craft ales and lager; to specialty teas, jams, cheese and cookies, as well as many household products that you find in supermarkets.
In spring 2017, S-Group introduced around 200 items from British retailer Tesco, including from it’s ‘Finest’ and ‘Free From’ ranges.
“We have been very happy and surprised how big demand there is for British tea or biscuits or marmalade. They have been affordable, but will those prices now rise? We have a frequent and deep discussion with Tesco to minimise the rises there, to keep the product assortment as wide as it is today” S-Group’s Jari Simolin explains.
Some European manufacturers who produce goods in the UK could move production to plants on the continent. But it’s not something that can happen overnight considering specialty equipment, staffing numbers, sourcing of ingredients and re-working the supply chain logistics which would be involved. So it’s the smaller specialty producers that could be hit hardest in the event of a no-deal Brexit.
“Some suppliers can move their productions to European plants if its a Europe-wide supplier with some production in the UK. But it’s just 140 days ahead and honestly nobody knows what will happen” says Simolin.
Customs officials in the dark on Brexit
Finland’s customs officials are in ‘wait and see’ holding pattern when it comes to Brexit, and advising importers to plan for both a Brexit transition period after 29th March, and also for a no-deal hard Brexit as well.
“At the moment we don’t have any information, except be prepared for both of the options” says Merja Halivuori, a customs procedures lawyer at Tulli.
As the clock ticks closer to Brexit date – deal or no deal – time is running out for all the procedures to be put in place and clarified.
“In the moment we are in the waiting mode, waiting for decisions and hopefully by the end of this month, or the beginning of December we will know something. But it’s quite a quick three months after that for ratification of the processes, and in the UK parliament, and it starts to be difficult” says Halivuori.
Tulli has prepared extensive information for Finnish companies importing goods from the UK, although the website makes it clear that there’s still no certainty that an agreement will be reached.
“Hopefully we get a two years, or two years plus one for a transition period to make our arrangements” says Merja Halivuori.
“But what I understand, the UK’s internal situation is so difficult that you just don’t know what will happen”.