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U.K. Importers and Distributors Stuck in a Brexit Jam

U.K. Importers and Distributors Stuck in a Brexit Jam

British businesses looked on in horror as the Oct. 31 Brexit deadline passed—the second one the U.K. has missed this year.

Despite Prime Minister Boris Johnson claiming he would rather be “dead in a ditch” than still be in the E.U. after the October deadline, the U.K.’s beer industry is coming to terms with another three-month extension. The deferral is a huge blow to breweries and suppliers who said a delay would be the worst possible outcome for their businesses, with uncertainty preventing investment and currency fluctuations hitting already-tight margins.

Johnson had brokered a deal with the E.U., which was voted through on its second reading in Parliament on Oct. 22, but an amendment made by Member of Parliament Sir Oliver Letwin ensured the U.K. could not leave the E.U. until the bill was enshrined in law. After Parliament voted against fast tracking that process to meet the Oct. 31 deadline, Johnson was forced to request an extension, and has called a general election on Dec. 12 to break the deadlock.

The new deadline is Jan. 31, 2020, which means added complications during what is always the toughest month for the beer industry. Last year an estimated 4 million British adults gave up drinking as part of “Dry January,” the most ever. That means breweries must take advantage of the festive season to secure enough liquid cash to pay bills during the slower months.

Even still, there will be plenty of beer to go around. The U.K.’s beer importers are uniquely exposed to the risk of no deal, and stockpiled products for both prior Brexit deadlines, leaving them with excess stock to shift. While the entire industry is worried about the collapse of the pound (now down 9% from the day of the referendum in June 2016), importers have additional worries regarding new customs laws, systems, and tariffs that could cost millions and result in delays at the border.

A worst-case scenario as noted by Operation Yellowhammer, the codename given to the government’s preparations for no deal, predicted delays of up to 2.5 days at the border for the first three months post-Brexit. While the time itself isn’t an issue for the beer industry, the costs associated with paying drivers extra time and delays in getting back out to pick up beer could prove onerous. Yellowhammer also suggests there could be fuel shortages in the short term, particularly in the southeast of England.