Brexit costing JD Sports 'double digit millions' due to red tape

Saleha Riaz
·3-min read
JD Sports is considering opening a distribution centre in Europe and hire around 1,000 people for it. Photo: Getty Images
JD Sports is considering opening a distribution centre in Europe and hire around 1,000 people for it. Photo: Getty Images

The executive chairman of JD Sports (JD.L), one of the UK’s biggest retailers, said Brexit has been “considerably” worse than he had expected.

Speaking to BBC’s Radio 4 on Tuesday, Peter Cowgill said trading after Brexit is costing the business “double digital millions” more than before, although he wasn’t clear yet on an exact figure, particularly because of the bureaucracy.

"We ship from our Rochdale, Lancashire warehouse, our distribution centre there, to all territories in Europe... The amount of red tape is very significant so it slows the whole process down, it is more costly."

He said that due to tariffs, the firm is considering opening a distribution centre in Europe which would hire about 1,000 people, although this would likely result in job cuts in the UK.

Cowgill noted that with stores closed due to the pandemic, JD was very quick to focus on online, and when stores were open it experienced a increased number of sales than in previous years.

Cowgill believes high street and shopping centre rents “have been too high for a long period of time” and are making brick and mortar shops “economically unviable.”

READ MORE: Hauliers express fury as exports to EU dropped 68% since Brexit

He also said a holiday on business rates should continue for another year, after which “there’s got to be a major reassessment of cost of rates to the retailer.”

Commenting on the recent call for an online sales tax on businesses that don’t have physical stores, he said “I can understand the rationale but the cost can’t be passed onto the consumer.”

The executive chairman also hit out at the government's decision to only allow essential shops to stay open.

He said this meant a shop like Marks & Spencer could remain open and sell clothes, while firms such as JD Sports had to shut. "Some essential retailers have been making hay out of selling clothes, whilst clothing retailers have been closed. It is bizarre," he said.

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown told Yahoo Finance that JD Sports “isn’t the first retailer to express frustration about the added costs of Brexit and certainly won’t be the last.”

“For JD Sports and others facing ongoing issues part of the solution may be to open distribution centres in European or partner up with new suppliers. If more jobs drift towards Europe as new supply chains are carved out, this could have a longer term effect on the UK’s economic recovery,” she warned.

WATCH: Why is fishing so important in Brexit talks?

Cowgill’s comments come as a study showed that British exports to the European Union fell by a staggering 68% in January this year.

According to the Road Haulage Association, 65-75% of vehicles arriving from the EU were returning to the bloc empty.

The organisation said that this was because of a lack of goods, delays in Britain, and because UK firms had stopped exporting to the bloc.

David Lowe, partner at law firm, Gowling WLG, explained to Yahoo Finance that “all international trade experts warned that Brexit would not mean frictionless trade. Frictionless trade is not just about zero tariffs – the admin of customs declarations, providing certificates etc can be much more costly and more likely to cause delay then a tariff.”

“The promoters of Brexit glossed over those inconvenient views of experts. And now businesses generally are discovering the impact of a customs border which makes trading with the EU harder,” he added.

Earlier this month, JD Sports continued its spending spree after buying US sportswear retailer DTLR for $495m (£360m).

The deal, expected to complete during the first quarter, follows its acquisition of the Shoe Palace chain last month.

The company said about $100m of the purchase price would be used to repay debt.

WATCH: 10 ways to Brexit proof your finances