UK retailers and manufacturers stockpiled in June against political and economic uncertainty
New figures released by the government’s Office for National Statistics (ONS) reveal nearly 1 in 10 businesses reported they were stockpiling in June. There was a particularly sharp rise in UK retailers and manufacturers stockpiling in the period 17-30 June, compared to the reported survey period 8-21 January.
Between 17-30 June, 15.3% of currently trading retailers and 20.7% of manufacturers said they had stockpiled products. That’s a sharp jump from January when just 4.9% of retailers and 11.1% of manufacturers reported they had stockpiled items.
The home delivery expert Parcelhero says this was the highest proportion of companies to admit they were stockpiling since the question was first introduced into the ONS’ Business Insights and Conditions Survey (BICS) in February 2021. Parcelhero says the data gives an interesting insight into UK companies’ concerns about the uncertainty of the election period and the ongoing impact of inflation and high interest rates.
Parcelhero’s head of consumer research, David Jinks MILT, says: ‘As companies prepare for challenging times or try to combat supply chain issues, they may store large quantities of goods for future use. That means they can increase product availability when demand escalates.
‘The last major period of stockpiling in the UK was in preparation for Brexit. Retailers concerned about obtaining products from the EU and manufacturers worried about the availability of components built up significant stocks to prepare for the impact of Brexit regulations.
‘This time, former Prime Minister Rishi Sunak’s unexpected snap general election call on 22 May could have spooked some companies that were likely anticipating a much later date.
‘Increased stockpiling might have reflected doubts over financial markets as the progressively woeful election campaign from the Conservatives stuttered on. Some companies may have had concerns about the impact of a Labour government on the economy as the likelihood of a change in power increased. A market collapse could have had an impact on the cost of raw materials and finished products.
‘Conversely, stockpiling may have been a result of an anticipated uplift in consumer sentiment following the election. A number of companies may have anticipated a rise in consumer confidence following a Labour victory, reasoning, “Things can only get better.” In which case, they may have been gearing up for an increase in demand.
‘However, there might be a number of other reasons why many UK retailers and manufacturers stockpiled in June. Interest rates and inflation results would have given UK companies pause for thought. During June, it was revealed inflation had actually fallen to meet the Bank of England (BoE) inflation target of 2%. However, this failed to convince the BoE to cut its interest rate. Such conflicting pressures would have left UK retailers and manufacturers struggling to anticipate demand in July.
‘Ideally, undue stockpiling should be resisted by companies, as it can lead to unsold goods building up in warehouses and distribution centres. This is expensive and potentially wasteful. However, it’s understandable that many firms will have tried to prepare for changing consumer demand in the wake of unpredictable political and economic events.
‘What is certain is that it will be those retailers with strong in-store and online sales that will ultimately triumph over economic uncertainty. Parcelhero’s influential report “2030: Death of the High Street” has been discussed in Parliament. It reveals that retailers must develop an omnichannel approach, embracing both online and physical store sales. Read the full report at: https://www.parcelhero.com/content/downloads/pdfs/high-street/deathofthehighstreetreport.pdf