REDHILL, England (Reuters) - Sainsbury’s (SBRY.L), Britain’s No.2 supermarket group, needs at least a year’s notice to figure out how it would deal with new European Union-UK trading arrangements that would come into play when the Brexit transition period ends, its boss said on Tuesday.
Last week, EU leaders approved a transition period to help business adapt after Brexit, allowing talks to start next month on the bloc’s future trading relationship with Britain.
They confirmed a political, if not yet legal, commitment to let Britain effectively stay in the bloc until the end of 2020, or 21 months after formal Brexit on March 29, 2019.
“Effectively the can’s been kicked down the road by 21 months,” Sainsbury’s Chief Executive Mike Coupe told reporters during a tour of its store in Redhill, southern England.
“We would need somewhere around 12-15 months worth of notice to be able to adapt to whatever we need to adapt to - to deal with any arrangement that is more complex than the current free movement of goods through the Customs Union,” he said.
Depending on the time of year about 30 percent of what Sainsbury’s sells is sourced from the EU.
Coupe said he was a pragmatist and was confident negotiations between Britain and the EU would deliver a trade deal.
“But anything that’s not a Customs Union and anything that doesn’t allow free movement of goods between the EU, as it will be, and the UK will add cost or reduce the freshness of the products we sell or both,” he said.
“If there was a ‘hard Brexit’, as in somehow the drawbridge was pulled up, it wouldn’t take long before there were literally thousands of lorries parked on either side of the (English) Channel,” he said.
Coupe said that as it only takes three to four days for Britain’s food supply to be seriously disrupted “it would clearly be a big issue.”
Britons’ discretionary spending has been under pressure from nine months of inflation running ahead of wage rises, as well as economic uncertainty due to Brexit.
However, last week, official data showed UK inflation easing and wages growth picking up, while clothing retailer Next (NXT.L) forecast some respite for the consumer.
Coupe said he was encouraged by the data.
“If wages start rising faster than cost inflation, disposable income goes up, then you’d expect that to manifest itself in more consumer spending in retail,” he said.
“But I think it’s very early days, I certainly wouldn’t be brave enough to call the turn at this point - we’ve just seen the (wages growth and inflation) lines go back to being equal.”
Coupe, CEO since July 2014, also told Reuters he planned to serve “at least” a five-year term in the role.
The Redhill store, which originally opened in 1899, has been extended and refurbished over the last three years and is now one of Sainsbury’s most modern.
Editing by Jane Merriman