How is Brexit shaping up for the food sector?
London trade show Food Matters Live (FML) kicked off with Brexit – a topic that is impossible to ignore for those in the business of food on either side of the Channel. The food industry will be the one affected more than any other by the UK’s exit from the European Union, said Luigi Scordamaglia, the president of Federalimentare, which represents the Italian food and drink sector. “We can discuss not whether the impact is positive or negative but how negative it will be.”
Depressing stuff. But sitting alongside Ian Wright, director-general of the UK’s Food and Drink Federation, and Paul Johnson, the director of the Institute for Fiscal Studies, Scordamaglia actually came across as a glass half full kinda guy. “Fifty percent of [UK] trade is with the EU and we do less trade with China, India and Brazil combined than we do with Ireland,” said Johnson. “We are bang next to the EU, and it’s very big and it’s very rich. If there’s no trade deal, we really are going to be in trouble.”
Indeed, that would mean doing deals with the US. Deaths from food poisoning over there are 100 times greater than here in the EU, said FDF’s Wright. “Do we want a regime that keeps us alive or one that doesn’t?” Blimey, I thought, if there are three days of this then I won’t survive.
The US is already playing hardball – the Trump administration appears to want to torpedo any “unnecessary regulatory divergences”. Trade experts at FML said this is nothing new – it’s simply posturing before negotiations even begin. Still, concerns the UK team will be eaten alive in any trade talks with the US remain. And if they make concessions to facilitate any deal, it could hamper trade with the EU.
Whether the UK sticks to the same regulatory path as the EU remains a moot point. The deal reached at the end of last week included promises around full regulatory alignment, but the UK government’s tune has changed already. In the Brexit era, nothing is agreed until it’s all agreed.
At FML, Scordamaglia said it is “absolutely fundamental” that the UK’s regulatory system mirrors that of the EU’s – which has driven up standards not just within the bloc but globally. Anything less will just confuse consumers, especially if it sees the floodgates open to genetically modified food and chlorinated chicken.
So, what will be on the supermarket shelves come March 30, 2019 (the day the divorce becomes official)? “We’re not going to run out of food,” said Wright. “The issue is choice and availability.” The UK Public Accounts Committee last month warned that food could be left rotting at the borders. At FML there seemed to be confidence that the parties will be able to thrash out a customs system. However, only a fool assumes it will be working seamlessly on day one.
Prices are also likely to continue to rise. In the bimonthly tracker of consumer opinion conducted by Which?, concerns about food costs have increased from 50% a year ago to 60%. “We need to avoid any shocks [because] in the past people have tended to trade down and eat less healthily,” said the group’s chief policy advisor Sue Davies.
Manufacturers are also getting twitchy. Talks are finally set to move on to trade early next year but that still leaves a mountain to climb. Food and drink businesses need time and certainty, but these are rare commodities in the Brexit era. “No one seriously thinks everything can be achieved in the timeframes,” said Declan McHugh, an associate director at Lexington Communications.
Businesses therefore need to be looking at contingency plans. Many already are: two-fifths of UK businesses (not just in food and drink) are looking to replace their EU suppliers; in the EU it’s 63% that expect to say au revoir to their UK suppliers, according to the Chartered Institute of Procurement and Supply. Doussin said there is no need for any knee-jerk changes but it’s worth looking about to see what’s on offer.
And what happens if a trade deal with the EU doesn’t materialise? Well, then we will see the “mother and father of all buying binges” said FDF’s Wright. In the six months before World Trade Organisation tariffs kick in, UK manufacturers could hoover up the ingredients set to become most expensive. But let’s look on the bright side. “There’s a huge opportunity in a good Brexit deal,” said Wright, “and I can’t see why we are not trying to get one.”