Britain—it turns out—might not be big enough for Brexit. Reports suggest that companies are currently stockpiling imports worth 40 billion pounds ($52) in case the country is faced with a no deal Brexit this March, but there is nowhere to put it. As a result, brands are now turning to warehouse space in Ireland and the EU.
At this week’s momentous vote on the future of Brexit, MPs rejected Theresa May’s deal by a historic 432 to 202. This has increased the likelihood of both a no-deal Brexit and a second referendum, as the chances of a deal passing through Parliament before March 29 are now vanishingly small.
If the country hurtles towards no deal—which is the default position if Westminster fails to agree on an alternative—retailers will need supplies for up to two months as the country adjusts to WTO rules, requiring more space than ever before. Once the initial shock of Brexit has passed, these warehouses will need to stay in place long-term, as more paperwork and hour-long checks on imports will make companies want to store a much higher proportion of their goods in the U.K.
But there simply isn’t enough space for this. According to Saville’s, the U.K.’s biggest real estate company, the U.K. is an “under-warehoused country.” Our warehousing stock works out to about 7.6 square foot of space per head, compared to the U.S., which has a far larger 39 square foot per head. This is partly due to the high population density of the U.K., but also because freedom of movement and borderless trade with the EU. has allowed retailers to store goods on the Continent since the 1970s.
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Rapid growth of e-commerce has gobbled up the available British space in recent years. Amazon dominated the market in terms of demand between about 2014 and 2016, and e-retailing still accounts for about two-thirds of storage space, according to Saville’s.
Hence why most logistics companies near London are being forced to turn away new customers. “We said from day one that whatever the outcome of Brexit, it’s good for us,” said Peter Ward, CEO of the UK Warehousing Association. “It’s deal, no deal, hard, soft, whatever, in the overall sense this will be good news for the warehousing sector because there’s inevitably going to be some sort of interruption in the supply chain.”
However, it is currently bad news for U.K. retailers—most of which are bringing in spring and summer lines early and having to turn to Ireland for warehouse space. Unlike the rest of Europe, Ireland will retain free trade with the U.K. under the Common Travel Agreement, which predates the EU. This means goods stored in the Republic can be transported to the U.K. without paperwork and long delays.
Ireland will also remain an EU member state, and thus be able to ship goods to the rest of the continent without delay. It also has a lower population density and more relaxed rules about new builds, making it a good solution to the current problem.
As a result, there has been a steady increase in applications for customs bonded warehouses to store apparel without paying import duty or VAT in Ireland. The Irish Revenue Commissioners has approved applications for five vast bonded warehouses this year and is processing a further six, as firms prepare to handle goods from the U.K. as a non-EU country.
Revenue officials are said to be busy inspecting warehouses for authorization in time for March 29, 2019 as companies step up no-deal planning. Fashion brands rumored to be storing goods in Ireland include Next, Primark and Zara.
“It’s a good solution to a terrible problem,” said Tamara Cincik of Fashion Roundtable. “In this way, Ireland could benefit. Fashion retail would also benefit from the drop in competition, as consumers north of the border would face higher prices for the same goods they demanded before Brexit.”
Equally, British brands that export to Europe are now quietly renting EU warehousing space to ensure their goods find their way to European shores after Brexit. British clothing brand Joules is one of them; it is stocking up early on 2019’s spring and summer ranges and placing them in EU warehouses in preparation for no deal.
The company said it was bringing forward its product orders to ensure its deliveries will not be held up by delays at the ports if the U.K. crashes out of the EU without an agreement. “Contingency plans have been put in place to mitigate the expected disruption that could arise in the event of a ‘hard Brexit,’” Colin Porter, the CEO of Joules, said in a statement.
Preparations are essential but the fashion industry won’t go down the dangerous path of a no-deal Brexit without a fight. After Wednesday’s meaningful vote, the British Fashion Council issued an unusually forceful statement insisting that a “People’s Vote” remained the only option the industry could support.
“We cannot emphasise strongly enough that a no-deal Brexit is a scenario that should be avoided at all costs,” said Caroline Rush, the chief executive of the BFC, on Wednesday. “The ongoing uncertainty and confusion that a no deal creates will have a negative impact on our industry, where investment is already impacted from the uncertainty being faced.”