Brexit takes retail stockpiling to record levels

UK retailers have seen their stock levels rise to their highest on record in October, as businesses prepared for a 31 October Brexit, according to the Confederation of British Industry (CBI).

Data from the CBI’s distributive trends survey said the pre-Brexit stockpiling, combined with the run up to Christmas and a backdrop of continuously declining sales had created the highest stock to expected sales ratio - known as stock adequacy - on record.

The data came as the EU granted the UK government at 'flextension' arrangement, postponing the UK's departure from the EU until January 31 2020, but opening the door to an earlier Brexit should the prime minister pass his Withdrawal Bill through the House of Commons before that date.

The latest spike in stock adequacy - the highest since the survey began in 1983 - followed another large peak seen in August.

The addition of pre-Christmas stockpiling is likely to have driven stock levels higher than previous months, as retailers looked to overcome Brexit uncertainty by ensuring levels of seasonal products earlier than usual.

Notably, the survey did not show a similar spike in retailing stocks ahead of the previous Brexit deadline in March. The broader backdrop of activity remained weak, according to the data.

Retail sales volumes and orders both fell in the year to October for the sixth consecutive month, with a drop of 10 per cent; albeit at the slowest pace seen over this period so far.

Retailers expect sales volumes to be broadly flat in November (up one per cent), but anticipate a sharper fall in orders.

Sales were seen as remaining poor for the time of year, with similar expectations for November as the Brexit uncertainty rolls on beyond 31 October with the new Brexit extension.

However, online sales once again provided a boost to the overall picture, with year-on-year internet sales up 49 per cent, an improvement on 33 per cent growth seen in September.

Similar growth is expected in November for internet sales, with the CBI predicting 51 per cent growth as consumers gear up for Christmas.

Wholesaling sales (down 10 per cent) declined in the year to October, following growth in the previous month (up 21 per cent).

Rain Newton-Smith, the CBI’s chief economist, said: “Retailers have now endured six months of falling sales, the longest period of decline since the financial crisis – the sector is struggling with ongoing digital disruption, layered on top of cost pressures from a weak pound and the cumulative burden of an outdated business rates regime.

She added: “Retailers have also had to contend with the looming Brexit deadline, which has partly driven a record spike in stocks. The timing could not be worse: the run-up to Christmas is a crucial time of year for the retail sector, and not knowing where we will be on November 1st is adding more strain to an already beleaguered sector.”

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