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Retailers on Friday told the House of Lords economic affairs committee their Brexit contingency plans are proving “extremely challenging” due to the risks of disruption on the single market’s vital supply chain.

Ian Wrigley, chief executive of British supermarket chain Co-operative Group, told the cross-party parliamentary committee that wholesale capacity in Europe is falling short of demand and German competition is keeping prices at home down.

The London-based retailer has switched seasonal stock over from the US for the final three months of the year to save on freight costs and has braced itself for the possibility of problems in deliveries over the next year.

“Clearly the performance of the European food supply chain is significantly below capacity that’s available, and we believe that is continuing to be the case,” Mr Wrigley said.

“Of course, we have to make contingency plans and things aren’t as well for certain types of business as for others and that’s of course a challenge.”

Mike Stevens, chief executive of Iceland, said: “There is a degree of uncertainty that is absolutely unprecedented.” The chain has so far managed its grocery business “as normally as it could under current circumstances”.

“We are thinking about getting sugar (supplies) from Europe right up to the last minute before we have to give instructions to the packers,” he added.

John Lewis, the department store group, has already shifted non-food stocks out of Europe and is planning for a worst-case scenario in which it does not sell its own ranges for the remaining months of this year. “That is a scenario that really would have effects on our businesses”, said John Lewis’s Patrick Lewis.

“From a food supply point of view it is particularly worrying,” Mr Lewis added.

Firms such as Co-op, which has extensive clothing operations in Europe, worry that they could suffer a two-tier Britain should both EU-imposed and post-Brexit tariffs on goods imposed.

Sue Edwards, a spokesman for Premier Foods, maker of Mr Kipling cakes, said the rise in consumer demand for premium products is being driven by the weak pound and consumers trying to save money.

UK retailers say their best hopes are for a transitional period following the March 2019 UK departure from the EU, whereby various trade restrictions between the UK and the EU will be suspended.

The Lloyd’s group said: “For the short term we would like to see a deal with the EU – we have to aim for that from a global perspective.”

Ms Edwards said she would favour a “cliff-edge model” where Britain were excluded from the single market immediately for a transitional period to smoothen the move and prepare for future trade.

However, she added that these interim arrangements were important for reassurance that a new trade deal could be struck eventually.

“It’s about getting certainty about a future relationship. The uncertainty is really bad for consumers – it’s not going to drive sales – and it’s hard for consumers to make decisions.”