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Summary
- JD sports chairman Peter Cowgill said Brexit-related issues were costing the firm more than £10 million.
- The retail company plans to open a distribution centre employing up to 1,000 people in mainland Europe, to save cost.
- Several importers and exporters have faced similar bottlenecks since new UK-EU trade rules have been implemented.
JD Sports Fashion (LON: JD) has reported that the new tariffs, new systems, additional paperwork, and red tape were costing the group over £10 million. The new trade rules came into effect on 1 January after the UK and EU signed a trade agreement in late December. Chairman Peter Cowgill said Brexit-related shipping and other delays have affected the firm’s productivity. Assorted businesses across the UK complained of similar trade-related bottlenecks while shipping to the EU.
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A new distribution centre in the EU
The FTSE 100 firm said that it was planning to open a warehouse distribution centre in Europe, in Netherlands or Germany, to meet the demand from EU countries and ease the financial strain. The EU-based warehouse would employ approximately 1,000 people, implying JD sports would create new jobs overseas.
However, the sports retail company would not be shutting down its existing warehouse located in Rochdale.
New trade rules
Cowgill stated the new trade rules post Brexit were slowing down efficiency due to the new lengthy regulatory paperwork, tariffs being levied on goods that the company imported from East Asia, and other red tape hampering free trade.
Many import-export companies in the UK, Scotland, and Northern Ireland are facing similar challenges following the implementation of the new trade rules.
READ MORE: December retail sales fall as shoppers tighten purse strings
Moreover, the government's decision to shut non-essential businesses while keeping essential ones running has drawn sharp criticism from the retail chief as supermarkets had benefitted from selling retail clothing during the same period when retail businesses like JD Sports remained closed.
The government announced numerous measures to support the businesses affected by the new rules. Some of the initiatives include helplines for export firms, expert run webinars, and business support from its 300 international trade advisors’ network.
Brexit impact on other firms
In comparison, UK-based retailers, such as Next (LON: NXT), Asos (LON:ASC) and Dixons Carphone (LON:DC) said their businesses had not faced a significant degree of issues despite experiencing some initial problems.
Notably, several businesses had pre-emptively setup distribution centres in the EU as a Brexit-related measure. Whereas UK-based fashion retailer Next had little exposure to the region. Such factors have affected UK retailers to some extent.
Separately, the UK-based broking firm, Numis had also announced plans to set up an office in the region in the following year to finalise deals that may have been impacted by the Brexit rule.
Impact on share price
JD Sports Fashion's (LON: JD) shares closed at GBX 809.20, down by 2.32 per cent on 9 February. The broader market index FTSE 100 closed at GBX 6,531.56, up marginally by 0.12 per cent on the same day.
