Weak euro threatens food’s export boom

By Nicholas Robinson

- Last updated on GMT

It's vital the UK stays in the EU, bosses say
It's vital the UK stays in the EU, bosses say

Related tags: Drink manufacturing sector, International trade, United kingdom

Food industry exports could be hit by challenging exchange rates, calling the sector’s recent growth into question, figures show as one of Britain’s biggest manufacturers urges the UK to leave the EU.

Export orders reported by the UK’s food and drink manufacturing sector since December last year had been higher than normal, according to the Confederation of British Industry earlier this year.

However, British Chamber of Commerce (BCC) figures showed 55% of UK manufacturers said exchange rates had impacted their ability to trade globally.

The first quarter of 2015 had been positive for UK manufacturers, which had turned to the export market to fuel growth, following a dip in domestic sales, said BCC director general John Longworth.

Yet, some commentators suggested the strong pound against the euro and the dollar would have a negative effect on UK food and drink industry exports in the future.

Margins hit

Margins would be hit, said leading economist Roger Martin-Fagg. However, manufacturers’ total output wouldn’t, he claimed.

“Exporters go on about the exchange rate and the impact it is going to have on their profits,” ​he said.

“But, it’s not going to impact how much they sell because most of our exports, including our food, are high-end premium products that are in good demand.”

Meanwhile, a call to exit the EU from Graeme MacDonald, who runs Britain’s biggest manufacturer JCB, was “unnecessary noise” ​for UK food and drink manufacturers, Martin-Fagg added.

Manufacturers’ time would be better spent focusing on producing high-quality products at the right price than getting involved in the EU’s in-out debate, he claimed.

If the UK was to exit the EU in the 2017 in-out referendum pledged by the Conservative government, Britain would be able to survive, but things could get tough, Martin-Fagg added.

“What most exporters don’t realise is that they would have to pay a 10% tariff on products made from fewer than 40% EU components.

‘Costs us £10bn a year’

“Being a part of the EU costs us £10bn a year and, for a lot of exporters, leaving the EU would mean subjecting themselves to the 10% tariff.”

It was vital the UK stayed in the EU​, industry leaders told FoodManufacture.co.uk recently.

“The biggest threat to our long-term economic wellbeing remains the prospect of leaving the EU,” ​EEF boss Terry Scuoler said.

“Any drift or dithering on this issue will mean uncertainty for British businesses, which would be very unhelpful for the long-term prospects of the economy.”

Provided there were no dramatic or sudden changes, however, Martin-Fagg predicted Britain would witness a boom in business, unseen in the past eight years.

“Now the election is over, I think we’re going to see between three and seven good years of growth.

“We’ve got a government that’s pro-business, interest rates won’t go up for another year and wages are beginning to rise … A year from now, it’s going to be ‘Booming Britain’,” ​he claimed.

Related topics: Policy

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