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September 26, 2018

The Sunday Times – No-deal Brexit fear sparks stockpiling stampede

“By the time Britain leaves the EU, companies will have piled up an extra £38bn of goods, according to an estimate by the Centre for Economics and Business Research (CEBR). Rolls-Royce said in July that it could start stockpiling parts within months, while Airbus has reportedly ordered suppliers to build up stocks. […]

 

Companies stocking up was the driving force behind a rebound in growth to 0.4% during the second quarter of the year. Indeed, without the stockpiling, the economy would have shrunk slightly. That is not unheard of: the “inventories” element of GDP frequently swings sharply from quarter to quarter. Nevertheless, it seems highly likely that pre-Brexit hoarding has given the economy a a boost, according to the economist Douglas McWilliams, who runs the CEBR.

 

“When you look at the unexpectedly strong growth numbers we’ve just had, there must have been an element of stock building in that,” he said. “There’s a danger that underlying growth is quite a bit weaker than it seems.”

Payback could come once the Brexit deadline passes. The CEBR is forecasting a “mini-recession” when British companies burn through their stockpiles rather than order new supplies.”

 

The article can be accessed here and the report here.

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