NO DEAL BREXIT – a big risk worth taking, or a potential catastrophe?

NO DEAL BREXIT – a big risk worth taking, or a potential catastrophe?

Brexit: a conundrum of magnitude. Will it happen? Won’t it happen and if it happens, will it go through with or without a deal? With uncertainty looming most ominously, we can only speculate just what the impacts will be.

It is suggested that the UK is only 60% self-sufficient when it comes to food, according to government figures, and 70% of its food imports come from the EU – but then we have become a nation addicted to avocadoes and year-round iceberg lettuce, will we starve as a nation? Most certainly not but availability and choice will be restricted. The departure with or without an agreement will have upheaval on what we see on our shelves after the day that Brexit does arrive.

Are we going to face situations where food is in short supply? Predictions suggest that within days of the UK’s European Union departure, shortages could occur. But what we do know is that necessity is the mother of all invention and we will still be eating – what are consuming though, might be different and might cost more for a while. However, as a nation it is likely we will not starve.

Many experts however across the British food industry, a great number of whom are producers, farmers and retailers which the British public depend on, are genuinely very nervous. No one doubts that there will be potential disruption to the food supply chain which could result in unharvested produce and empty shelves in the supermarkets. However, the supply chains from Europe have products to sell, and they simply can’t shift it anywhere else. Conversely the British consumer wants to buy them.

So where will this lead us? The truth is no one has a clue!

Towards the end of January, CEO of the UK trade body, Food and Drink Federation, Ian Wright said that a no deal Brexit would be “potentially catastrophic” and the Prime Minister was not giving adequate attention to the concerns held by the food industry. Such apprehensions have been heightened since the deal on the table was thrown out of parliament in January. Speaking with Business Insider earlier in February, Wright said:

“We keep telling them [the government] that it [a no-deal Brexit] is potentially catastrophic but it is difficult to know just how much they’re listening.”

In an effort to mitigate a disastrous fallout, various food manufacturers have started to stockpile ingredients and finished products out of fear of supply shortages. CEO Siobhan Talbot of Irish dairy and sports nutrition company, Glanbia, spoke with The Irish Times and told the newspaper:

“We have stocks in the UK, more than we would normally have. We are very much planning for a no-deal at this stage, we have all the supply chain alternatives, all those pieces that one would expect but that does not mean that that would be easy and that does not mean that that wouldn’t be without its implications.”

Of course, Brexit isn’t just going to impact on food production; anything linked to the industry will be at the mercy of the subsequent halo effect. Most of the food safety laws in the UK stem from legislation passed by the EU. This includes the legal necessity for food businesses to use food safety management systems which are based on the codes of HACCP for food safety management. Questions have arisen as to whether or not such legislation will be retained. It is unlikely to change as the approach is a global one and importantly, The World Health Organisation (WHO) established international food standards which act as a legislative base for countries throughout the world. To throw out the rule book would be pure madness then. It is likely that existing food safety legislation will simply be ‘cut and pasted’ and then restamped with a Union Jack instead of a European flag.

The legislative framework is not nonsense, however, and they provide a solid foundation for food safety to operate. It is believed therefore that if and when Brexit does happen, a review of the legislation will inevitably transpire, but it is unlikely that much in term of amendments would need to follow. If the requirements are unnecessarily cumbersome, then change may happen, and this could be for the better.

Labelling and packaging of goods which are intended for export from the UK into the EU will need to adhere to and comply with EU law. As such making these changes for the sake of it, would not be prudent and could be harmful.  The biggest predicted changes are to food safety however; the number of enforcements visits may be decreased to ease the legislative weight.

Future labour availability is probably going to be one of the biggest impacts on British Food and Fresh Produce from leaving the EU. We have as a nation had a ‘cheap labour tap’ which has been flowing since 2004. Immigration, one of the bugbears of many who voted out, has fed the British economy with abundant, motivated and very often well trained and educated labour which has worked in the food factories and packhouses as well as in the fields picking fresh produce. This tap has effectively been turned off and this will have consequences for the industry. Stories of produce rotting in the fields are rare and are probably more down to flushes causing gluts, or over planting than pure labour availability. However the indigenous British population has historically been reluctant to pick fresh produce from the fields, so will this change?

Most certainly not, so how will it get picked? The answer is going to be in the short term enhanced labour rates to attract people to undertake these tasks and in the longer term, automation.  But, despite the press releases from the universities working on these projects, realistically these are 3-5 years away. The cost of production and subsequently the prices of fresh fruit and vegetables will increase. Therefore it will be interesting to see whether the retailers will absorb these costs or pass them on.

Is it coincidental that we have seen wage growth creep above inflation for the first time in over a year and we are seeing levels of unemployment fall to the lowest since the mid-1970’s? As the labour tap has turned off, are we seeing the forces of restricted labour supply and continued demand force up wages? Let’s see.

Supply Chain & ProcurementLogistically, getting food into and out of the UK once Brexit has occurred is likely to change. Some have made a guesstimate that if an additional two minutes are required to check trucks and lorries, this could generate a 17-mile tail-back within a single day. The Dutch fruit and vegetable exporters are working on a lorry passport scheme which is designed to reduce these potential problems by creating a fast track for their goods. They want to sell it and the consumers will want to buy it – will market forces inevitably not come in to play?

Some businesses who we speak to have taken on a more stoic standpoint and are getting on with it, rather than waiting to see what happens. Some of the shrewder operators have been getting into the swing of things with new product development and focussing on creating new or alternative items which can be sourced locally and do not come directly from the continent.

From an environmental perspective, the reduction in food miles could be a welcome result from the exit process. Several of the more innovative businesses have investigated specifically how food mileage can be shrunk or negated and developed new initiatives that specifically tackle this issue. One good example is growing food aquaponically (a fusion of aquaculture and hydroponics). If this approach is applied to growing salad items, it is considered that food miles can be cut down to almost zero. This could remove problems such as those faced in Spain in early 2017 due to unseasonably cold weather that had the knock-on effect of a salad shortage in the UK. Shrinking the number of miles food must travel or negating the carbon footprint associated with growing and transporting produce, at least, will have a positive effect on the environment.

New technology is not always the answer though, but adaptations to ones already in existence or indeed considering the opportunities of looking at readily available alternatives. With regards to market supply, it would be necessary to review supply bases to ensure that the best value is on offer. Understanding where the potential kinks in the chain are (regardless of a crisis, if that is indeed what Brexit is), is necessary to prevent a weakness causing a snowball effect. The result of carrying out such reviews, therefore, should reveal what unnecessary efforts can be removed with the result being, improved efficacy of the supply chain.

On the whole, the outlook of what the impacts of Brexit will be on the food industry are in the short term more negative than positive. But – we simply don’t know what will happen – if anything will change at all! The uncertainty is definitely affecting business confidence as we have clients who have delayed investment projects until April and have held back on some senior appointments until there is more clarity.

But until B-Day arrives, and that specified date is still up in the air, no one can say with absolute confidence just want the future holds. Until then, is it business as usual? To keep the nation fed, it will have to be.

Submit Your CV