Shortages of goods arriving in the UK and inflation triggered by supply-chain disruption could "choke off" any recovery in the retail sector, an expert has warned.
Mark Hart, a retail partner at tax, accounting and business advisory firm Blick Rothenberg, warned of the danger of “an inflationary spiral in the wider economy” fed by goods price increases and by shortages of workers in the hospitality sector arising from the Covid-19 crisis and Brexit.
He also flagged challenges for companies in having to have more money tied up in stock to insulate themselves against supply-chain disruptions.
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Mr Hart said: “With around 60% of UK-based suppliers reporting delays to imports in the past month, with more than four out of five worried they will run out of stock and struggle with sourcing extra to meet demand, there is a real danger that inflation and lack of goods will choke off demand.”
He added: “Supply lines are critical and need to be continually monitored. The recent disruption caused by the grounding of the container ship in the Suez Canal has shown just how tight supply lines have become.
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"The pandemic and Brexit have made retailers aware of the need to move away from ‘just in time supply lines' to ‘just in case’, holding more stock than they would have done previously to ensure demand is managed. However, while this helps meet demand, it means that cash is tied up in stock.”
Mr Hart noted the importance, in this environment, of retailers managing payment terms with their suppliers.
He added that retailers should continue to manage stock by ensuring they have multiple suppliers so that they can continue to meet demand and avoid disruption should issues with supply occur.
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