September 4, 2017
By Chenoa Geerts, Associate Political Consultant
Running up to the Brexit referendum it was often referred to as “scaremongering”, when politicians, industry representatives, academics or economists emphasised the adverse consequences of leaving the EU. Many today still say that those negative effects have not materialised over a year after the referendum. However, it is safe to say that many in the food industry have certainly felt them.
Indeed, it was recently announced that a UK food supplier ceased trading, causing 260 job losses, as a result of Brexit. The blame was mainly put on the devalued pound, which has significantly increased import prices, making it commercially unviable to continue trading. The pound is currently hovering around its weakest value against the euro since 2009.
Many (mainly Brexiteers) have been quick to point out that the weaker pound has boosted the UK’s exports and has benefited many sectors. However, the food sector is not among them. With 31% of food coming from the EU and the UK’s food self-sufficiency rates at an all-time low, food imports are vital for UK food businesses.
Research by the British Retail Consortium, a trade association, showed that that in the absence of a trade deal, prices of imported foods could increase by 22%. This will not only harm consumers (who will see everyday costs of buying essential food products drastically increase), but also food businesses – who will be severely impacted as their sales and, consequently, revenues will decline.
Additionally, if no deal is reached on customs, the UK’s border inspection points could be overwhelmed by the amount of vehicles carrying goods to enter the UK. This would cause huge delays at ports and other places of entry, increasing the costs of storing perishable foods such as meat, dairy products, fruit and vegetables, which are among the most imported products from the EU. This increases the risk of food insecurity, depriving businesses and consumers of certain foods, and boosts prices of products, which will again slice into food businesses’ profits.
With this reality check, the question remains what can be done to minimise these risks for the UK’s food industry. In terms of the Brexit negotiations, the UK (it is increasingly clear) is dependent on the EU’s position. However, there are things the UK Government can do domestically to help businesses survive Brexit. For example, infrastructure should be put in place to facilitate border checks and support supply chains across the UK (and work should begin on this infrastructure now). Furthermore, the Government should invest in sustainable food production methods and expand the UK’s production capacity to avoid food insecurity. Boosting self-sufficiency and increasing security would make food businesses less dependent on imports from the EU and thereby less susceptible to currency fluctuations.
With the vast challenge ahead, the question is whether the Government will be able to invest all the money and energy needed to support the food industry in these difficult times. However, with an industry that provides 15.5% of jobs and contributes £28.2bn to the UK economy, one would hope that the food sector will be one of the Government’s top priorities.WhitehouseEU