How disties are reacting to the new Brexit deadlines

CRN speaks to a number of distributors to gauge their reaction to how two potential new deadlines have affected their post-Brexit plans

The recent agreement between the UK and EU to extend Brexit's leave date beyond the proposed 29 March deadline has created two new possible leave dates.

If Theresa May's meaningful vote proves third-time lucky in the House of Commons, the EU has proposed a leave date of 22 May. If her vote fails, then a no-deal Brexit is set for 12 April.

After MPs took control of parliamentary decision making from the government, a host of new votes are expected to take place today on Brexit.

A recent CRN poll indicates that revoking Article 50 is the most popular choice among our readers, with no-deal Brexit in second place.

Many channel firms have had no-deal Brexit plans in place for months, with a number of distributors stockpiling kit to prepare for such an eventuality. So how do the new dates affect the plans they have formulated with the 29 March deadline in mind?

Alex Tatham, MD of Westcoast, has been an outspoken advocate of the necessity of preparing for a no-deal scenario. His opinion has not changed, in spite of the mooted new leave dates.

"We are still focused on preparations for no deal," Tatham said. "All the stock that is coming has either come or will come in the next two weeks.

"The extra two weeks will not make any more material difference to what we are doing. I am hoping that some kind of deal is going to be done which will extend the deadline to May.

"If there is a deal, I'm assuming that there will be some kind of customs union that will allow us to trade under current trading conditions. That won't make a difference, therefore the stock that I have bought - helped by various vendors who have tried to cover this situation - will just sell through."

Paul Cubbage, managing director at Target Components, told CRN several months ago that he felt then that it was too soon to stockpile hardware in case there was a chance that the March deadline would be pushed back.

His opinion on stocking extra product has not changed in the intervening period.

"Anybody who is sat on a pile of stock, that is just going to depreciate," he said. "We are still as uncertain as we were, but I still think the least likely outcome is a no-deal Brexit."

He said that the extension of the Article 50 deadline was inevitable, but that any hurt the channel will feel from Brexit will be short term.

"The biggest impact of Brexit always has, and always will be, the impact on business and consumer demand," he stated.

"If we have a no-deal Brexit there will obviously be a currency impact and short-term adjustment, but we deal with companies all over the world in terms of supply, so we will always be able to get our hands on stock; we've seen it with the graphics card and CPU shortages.

"Once we have some certainty - with the exception of a no-deal Brexit - and some confidence back, and know what the new normal is going to look like, people will crack on with business."

Cubbage was one of a number of distributors voicing concern about the repercussions on the channel of stockpiling kit unnecessarily, saying that if a deal was secured, extra stock would be released, pushing prices down.

Such a scenario would be of great benefit to resellers, according to Jon Atherton, commercial director at CI Distribution.

He told CRN that although the majority of the VAD's vendors are UK-based, it has still done some stockpiling in order to avoid any border delays. This was done on advice from its vendors, he added.

"The noise we are hearing from our suppliers has been positive and they say it's business as usual so far - but that could change," he said.

"There will no doubt be a splurge of price reductions on certain lines because of stock pressures within the distribution set-up. It could be an interesting time for resellers in the coming months because I think they'll get some good deals."

Border blockages and price cutting may not even be the biggest threats to the channel in the event of a no-deal Brexit.

Dave Stevinson, MD of QBS Software, warned that changes to currency rates could have the biggest effect on pricing.

"Changes in currency are a bigger risk than excess inventory, which would probably be covered by price protection or contracts between the vendor and distributor," he explained.

"My advice to resellers and disties is to have a strong look at their foreign exchange policy in the next few weeks and months - a big swing can wipe out all the profit."