Hard Brexit Film Supply: - Where Are We Now?
We estimate the UK imports of packaging films are between £800 million and £1 billion every year. These figures are based on our own market analysis of film suppliers and converter company accounts which includes the top 25 UK companies in the food and pharmaceutical sectors.
If anything, these figures may be a significant underestimate due to the pharma market usage but whatever the actual figures, it’s safe to say that the predominant supply source for over 80% of these films is Europe. The packaging films in question are predominantly polypropylene, in all its various forms, polyesters and aluminium foil plus special films with exceptional barrier or other exceptional properties.
Where Are We Now?
In view of the determination of our political masters, both here and on the Continent, to ignore what’s best for business on both sides and continue their political posturing, we need to seriously consider all other options available if the flow of material from Europe to the UK is disrupted.
Even in more normal times lead times can be 4, 6, 8 or even 10 weeks, dependent upon the type of film and the demand. Extensive delays at the ports or indeed changes in transport charges and tariffs could mean higher costs and/or disruption in supply.
What Are Our Options?
As the UK has a very small indigenous supply base for these films (primarily Innovia) UK companies have developed an extensive supply chain for films from all around the World. The major reasons Europe dominates the markets of packaging films is its proximity to our shores, along with a focus on technical development of films as an alternative to bulk supply and in addition the tariffs the EU have levied on alternative sources of supply to protect the European producers.
Presumably tariffs would no longer apply if there was a ‘hard Brexit’ thus the bulk supply of polypropylene from the Middle East becomes even more competitive. Similarly, the availability of polyesters from India and the Far East would benefit from lower costs giving easier access to the UK market. In addition, over the last few years we have seen a transformation of the size of the companies in film manufacture and supply.
As a consequence, major companies such as Jindal, UFlex, Du Pont, Toray etc. have strengthened their positions by M & A activity, this has enabled them to not only broaden their product range but also enabling them to supply from alternative countries from outside the EU, in particular, Egypt, the Americas, Far East and Turkey.
Supplies from all these countries, are all directly into the UK ports, thus avoiding any of the disruption at EU border controls may create. However, it is inevitable that film lead times would be extended so more detailed planning and extra storage for deliveries would be required.
These are the ‘elephant in the room’. No-one can calculate the short term effects on Sterling of a ‘no deal’ Brexit. However, most economists are forecasting a weakening of the currency against both the Dollar and the Euro along with increased volatility in the day to day rates being quoted.
Thus we can surmise that should there be a ‘hard Brexit’
- Film prices will increase
- Price will be on date of shipment not on the date of the order
- There will be no fixed prices
So we would suggest
- There are alternative sources of supply for all the films we currently buy from Europe
- There are likely to be longer lead times for delivery of these films
- They are likely to be more expensive
- They will be more price fluctuations than usual
- More raw material stock will be required to be held
- Planning for potential film supply disruption due to a ‘hard Brexit’ needs to be done now, as lead times of films would become extended.
We don’t usually use these notes for Company business but any National Flexible customer reading this, who has not already committed to our Brexit Contingency Plan, should contact their Area Sales Manager or Customer Champion as soon as possible as many of our first half 2019 plans are rapidly filling up.
A very Happy Christmas to all and a Healthy, Wealthy 2019.
Any views you may have on any of these thoughts would be welcome, meanwhile why not join me on LinkedIn for more regular updates.