With time running out on a BREXIT deal with the EU, U.K. online seller may become increasingly worried about cross-border supply chain issues and may need to store more inventory in country.
The COVID pandemic had put the U.K./EU trade deal on the back burner for much of this year and now the two parties are trying to desperately work out some deal before the end of December deadline. But it’s looking a bit grim.
Meanwhile, Amazon has been investing in its U.K. logistics and delivery infrastructure which seems to be part of its growth in the country, but also may be impacted by the realization that supply chain delays may be inevitable, especially if there is a no U.K./EU trade deal.
If a hard BREXIT becomes the reality, companies may be forced to maintain more inventory in the U.K. to be able to serve customers. A hard BREXIT would likely result in immediate long delays at ports of entry as goods will be subject to stricter customs clearance.
Even a trade agreement with the EU will still be a very different process from the free movement of goods U.K. companies currently enjoy with EU member states.
“Once Brexit occurs, and Britain leaves the EU, it will be classed as ‘a third country’, outside the single market. It doesn’t matter what kind of customs union is in place, or whether there is a free-trade agreement. After Brexit, full customs declarations will be required for all goods imports and exports shipped between Ireland and the UK,” said Carol-Ann O’Keefe, Assistant Principal Officer at Revenue Commissioners.
This could be especially important for smaller Amazon third-party sellers that source their goods from the EU and may have relied on a fast flowing and friction free supply chain that will be significantly slower and more complicated after BREXIT is completed.
In addition to tying up more working capital in inventory, small sellers will also need to keep more stock in the U.K. to maintain sales.
This requires warehouse space and since many small sellers may not have their own warehouse capacity, this mean storing inventory at Amazon distribution centers.
Amazon Accounts For 1/3 Of New Warehouse Space In The U.K.
Updated data from global commercial real estate services firm Cushman & Wakefield indicates that about 1/3 of all 2020 new warehouse space in the U.K. (11.5 million sq. ft.) was secured by Amazon alone.
This includes a massive 2.3 million sq. ft. lease of a brand new four story warehouse being built at Panattoni Park in Swindon. But also includes many projects like this 150,000 sq. ft. distribution hub in Glasgow which is scheduled to be ready by mid 2021.
Exciting new development within the Glasgow Business Park in Baillieston— Cllr Elaine Ballantyne (@CllrBallantyne) November 6, 2020
to be completed by summer 2021 bringing in 300 jobs to area.
150,000 sq ft warehouse with 500 electric van parking spaces
Have received confirmation Amazon have secured the tenancy pic.twitter.com/IH8u3XwgtI
While online commerce growth in the U.K. accounts for 40 percent of warehouse space being leased, Amazon appears to be in a league of its own when securing distribution and logistics capacity.
Regardless of the type of BREXIT that will occur at the end of December, Amazon appears ready to handle a larger inventory level in the U.K. for not just its own sales, but those of third-party marketplace sellers as well.