Brexit – what happens next? Jeremy Bacon, ceo of the printing company, the Sherwood Group gives his opinion on what is likely to pan out for the card trade as a result of Brexit.
In my last PG Buzz article on Brexit, I had hoped that by now we would have had a basic agreement on the Brexit situation with the EU. I also warned that if we did not have an agreement by Christmas then as a country and an industry we should all plan for the worse.
This article discusses what is likely to happen next and offers practical advice on how to plan for the future.
It is useful to consider what happens next from the point of the EU, as it seems to be calling all the shots. It certainly does seem that both of our political parties are in disarray.
The United Kingdom has three realistic choices. (I cannot see a consensus for ‘the Norway option’, as this does not end free movement of labour.)
- Agree to Mrs. May’s agreement. The EU may offer concessions on the Irish backstop but they are pushing us towards a second referendum or an extension of article 50.
- A second referendum. This has gained support but would be politically divisive and lengthy.
- A ‘no deal’, which will be disruptive to both the UK and EU economies.
All the alternatives suggest that there will be uncertainty in the future and business hates uncertainty.
The fact we are supposedly now just over two months away from leaving the EU, and appear to have made little progress in a consensus of our future direction as a country, suggests a no deal is a significant probability. If we do get an agreement (which still excludes trade), or go back to the people then we get continued uncertainty. In Donald Rumsfeld’s words “uncertainty is a known known.”
How does it affect greeting card publishers?
I would recommend for publishers to increase their stock holding of greeting cards for two reasons – continuity of supply and price. If there are disruptions to the supply of raw materials from the EU then at least with finished goods in your warehouse you can meet your customers’ needs.
We at Sherwood have placed orders and arranged for six months of coated board stock to be held in the UK.
We are facing board cost increases of between 5% and 10% already in 2019 due to pulp cost and energy price rises. Post ‘no deal Brexit’ anything could happen with additional increases being extremely likely as £sterling collapses against all major currencies and WTO tariffs are applied to imports. Board suppliers are saying their firm 2019 pricing is dependent upon what happens with Brexit, so they will force through Brexit-related increases by calling force majeure. We are advising customers to investigate de-specifying materials to offset cost increases and place firm orders for bespoke lick coated boards with their printer. The New Year has seen business failures in both the paper merchant and mill sectors of the industry.
The major risk to our industry has been the fall in consumer confidence and associated decline in footfall on the high street. The news that Paperchase is considering a creditors voluntary arrangement (CVA) demonstrates the fragile nature of retail economy.
The industry faces risks associated with a collapse of £sterling and potential tariff increases if we are subjected to WTO tariffs.
The time has come for greeting card companies to implement Brexit plans as we cannot rely on the politicians to resolve this mess.
Top: While no one really knows how it will pan out, Brexit is bound to have some impact on the industry.
