Brexit: The Impact On The Food And Drink Industry

Brexit: The Impact On The Food And Drink Industry

June’s referendum result has raised concerns for businesses operating in the UK’s food and drink industry. Can the sector still find ways to thrive in the face of widespread uncertainty?

Britain’s decision to leave the EU has led to enormous uncertainty in the food and drink industry. Immediately after the referendum, the National Farmers’ Union warned of food price rises, while Ian Wright CBE, director general of professional body the Food and Drink Federation (FDF), voiced concerns that the UK industry could lose all EU labelling and safety regulations. But how well founded were these fears and what should food and drink SMEs be preparing for post-Brexit?

Essential negotiations

Mary Quicke MBE is owner of Quicke’s Cheese in Devon. She’s also the 14th generation of her family to run Home Farm and its shop at Newton St Cyres. Her biggest concern after the referendum result is its impact on trade. “We export nearly 40% of our cheese and the UK currently has no post-Brexit trade agreements in place,” she says. “Over the past three years, we’ve diligently grown our exports by 75%, so to lose any of the traction we’ve gained would be damaging.”

But it’s not all bad news. Quicke believes currency fluctuations could offer a short-term benefit to SMEs like hers, though the government still has a lot of work to do. “In the short term, with currency rates as they are, the lower value of sterling could potentially increase the volume of exports – but this has yet to be seen. It’s essential that the government negotiates an arrangement so that all British produce remains an attractive proposition to overseas customers,” she says.

“Quality food tends to fare well during downturns. When people can’t afford the big ticket items, they buy themselves little treats instead”
Mary Quicke, owner, Quicke’s

Early fears of a post-Brexit recession have since been downgraded to expectations of a “sharp slowdown”, in the words of the acting director general of the British Chambers of Commerce. Within the food and drink industry, restaurants and bars are likely to bear the brunt of this more than businesses like Quicke’s Cheese. While acknowledging that such a slowdown would not be an “ideal situation” for the country, Quicke believes there will be a silver lining for some businesses. “The only plus side for us is that quality food tends to fare reasonably well during economic downturns; that has been the case historically. When people can’t afford the big ticket items, they resort to buying themselves little treats instead, such as artisan cheese.”

European partners and working with the government

According to the FDF’s Wright, more than a quarter of the food and drink industry’s workforce is from Eastern Europe, making restrictions on freedom of movement another key concern for businesses. As a result, Britain could soon be facing a skills gap. “The UK hospitality industry is lucky enough to employ people from hundreds of different nationalities,” says Simon Weston, director of drinks company Pontoon Cocktails, which supplies bars and restaurants across London. “If it becomes more expensive to employ these people, that increases the cost of producing and serving food and drink, which will have to be passed on to the consumer.”

It’s a view shared by the Food and Drink Federation: “The government must develop a new migration policy that ensures manufacturers have continued access to the workers we need to address a looming skills gap and the drive for future innovation to support the UK’s competitive advantage,” said an FDF report published in July. “Businesses need a clear road map setting out how the government will manage the exit process in the complex area of food legislation.”

Around 27% of the UK’s food and drink manufacturing workforce are non-UK EU nationals and the sector’s growth means that the industry will need 130,000 new skilled workers by 2024 as ageing staff retire over the next decade.

Wright also touches on how the EU referendum might affect other legislation: “[The] government should delay the introduction of measures that will impose extra burdens – like the proposed Apprenticeship Levy and Soft Drinks Levy – on business at a time of such economic fragility. Regulatory stability and predictability is essential.”

It’s worth remembering that Article 50 allows two years for renegotiation of the UK’s position – a process that hasn't even been triggered yet. Indeed, the government’s policy paper on withdrawing from the EU warns that it could take a whole decade to finish negotiations of arrangements with the EU and trade deals with countries outside it. In the meantime, any concerns regarding EU regulation – such as having to redraft food labelling and safety regulations from scratch – remain speculative, with many commentators emphasising that Europe would have nothing to gain from imposing such sweeping changes.

Law firm Burges Salmon writes: “It is very likely that if the UK wishes to trade with the EU it will have to abide by many of the existing rules and regulations affecting the food and drink sector. Governance around labelling, food safety, and health claims will remain if the UK wishes to export food products to the EU.The governance around labelling and food safety is well embedded in existing UK legislation and it is unlikely that there will be a rush on the part of the UK government to make significant changes to these rules.”

From fields to plates

Paul Pegg is operations director at Reynolds, one of the UK’s leading fruit and veg suppliers. “Starting with our supply base, there are views that Brexit may offer a boost to British farmers, but much will depend on future developments regarding areas such as international trade deals and government regulation,” Pegg says. “Given the cost pressures British growers are already under, especially from the National Living Wage, any restrictions around movement of labour could be disastrous. Much of the workforce in the sector is made up of non-UK citizens.

“If it becomes more expensive to employ people of different nationalities, that increases the cost of producing and serving food and drink, which will have to be passed on to the consumer”
Simon Weston, director, Pontoon Cocktails

“In the short term, the weak pound seems to be supporting the UK tourism industry, which is offering a boost to some areas of the hospitality industry, especially the hotel and leisure sectors. Pleasingly, UK consumer confidence seems to be holding up reasonably post-referendum, and eating out is now very much ingrained in the public’s DNA.”

But Pegg also points out the downsides of the weak pound: “Our current pricing period runs from 1 May until 31 October, which means our customers have not yet seen any price increases. However, when we renegotiate our contracts, price increases are inevitable for anything procured outside of the UK. As we only grow 59% of the food we eat as a nation, the overall impact will be significant.”

Creating new opportunities

Jimmy Buchan is a fisherman from Peterhead with over 40 years’ experience. In 2015, he launched Skipper’s Choice, an online fish box service providing sustainable and fresh seafood to consumers across the UK. He feels the referendum result offers long-term advantages for his industry. “With the bulk of European fishing activity in our waters, we’re in a stronger position going forward,” he says. “Like all deals there will be losses as well as gains, but we are in a very strong position to create new opportunities and service existing supply chains.”

Buchan remains optimistic about what’s to come, emphasising that trade will be a key government priority in Brexit negotiations, and that new policies and incentives could have a big impact. “It’s the role of government to look after the interests of its people and producers, and to pave the way for trade to be made as accessible as possible,” he says. “Tax incentives, grant and employee assistance, and easing of legislation to help SMEs grow are all helpful ways the UK can be competitive.”

By ContentLive



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