The question: “What are the particular implications of Brexit for the food export trade?” comes from a recent webinar we hosted on What exporters need to know about Brexit in 2018.
The answer below comes from Enterprise Europe Network who spoke alongside the Institute of Export & International Trade to give an overview of the challenges and opportunities that UK exporters will face in 2018 as the negotiations continue and hopefully progress.
It is difficult to give a simple and general answer to this, but here are some elements of answers:
There are Potential negative impacts for your cost base and logistics:
- workforce recruitment, seasonal workers: will you have enough e.g. pickers and packers to fulfill your export orders?
- your raw materials and supply chain: if you import EU raw food material to make your products, you will be affected , Milk in particular as it is a big import from the EU and would be having a 36% tariff if WTO rules apply.
- Your manufacturing plant: You may need to look at integrating it all in the UK rather than having it split into different sections in various countries.
- Logistics: customs check and issue of perishable goods waiting for clearance.
- import tariffs imposed on UK food from the countries you plan to export to: Two-thirds of agricultural food exports go to the EU. There are currently trading tariff free. On top of that, a further 27% go to countries that have a free trade agreement with the EU (negotiated tariffs). These will need to be negotiated or renegotiated by the UK if exporters are still to benefit from low or no tariffs)
- There is also the issue of veterinary checks from EU member states for the food safety of imports to EU market. Food inspection is a substantial part of the work of the EC. There are 1000s of work days on inspections and veterinary checks aimed at determining whether a non EU country food product can enter the EU market. Data from 2015 show that its vets and inspectors spent a combined 4,720 days on overseas visits. Another 150 staff provide back-office support.
- current food safety legislation (labeling, allergies, gm food regulations, packaging) will become UK law as part of the EU Withdrawal bill, but any changes in the EU law you will need to keep up to date if you have EU clients. The UK government may decide to make changes to the (currently EU) UK law so if you sell both domestically and internationally, this may mean different rules to different countries. Given the importance of European markets for UK food producers, it is likely that the UK will choose to mirror EU regulation on food safety and food quality, food ingredient labeling, animal health and welfare protection and other relevant regulations also after Brexit.
In terms of positive aspects to consider:
- Why not research future global food demand trends and look at manufacturing in the UK the products that will be in high demand. Innovate with your products to that you can ask for premium prices/justify your increased costs.
- exchange rate may remain favorable to UK exporters
- take advantage of higher dependency on local production: look at having your manufacturing base in an EU country
- look at the domestic market for sales as it is likely that EU food products imports will also be reduced so more opportunity to sell to UK consumers.
- The UK has a strong negotiating hand where the UK is a net exporter: for instance the UK supplies 80% of Ireland’s flour. Ireland will want to make sure they still have access to this and at the lowest cost possible. Some non-EU countries negotiated trade deals with the EU because they were interested in the UK market and they would not want this to disappear.
FT, Guardian, food trade associations report and https://www.pwc.nl/nl/brexit/documents/pwc-brexit-monitor-the-impact-on-agrifood.pdf
You can watch the webinar on ‘What exporters need to know about Brexit in 2018’ here:
Following the 2017 version of the webinar, we also released a 12-point checklist for companies starting to plan for the different potential outcomes of Brexit. You can view this checklist here.
If you have any further questions about Brexit – or exporting in general – you can use the Institute’s ‘Exporter Helpline’ service.
The helpline is either free for Institute members or can be accessed for a small fee by non-members. More information and access to the helpline can be found at:
About Enterprise Europe Network
Enterprise Europe Network helps ambitious businesses innovate and grow internationally. Jointly funded by the European Commission and Innovate UK, our experts advise and connect those looking to commercialise ideas and succeed in new markets. In the UK, Enterprise Europe Network is delivered by 24 organisations located across England, Northern Ireland, Wales and Scotland.