A month ago, something extraordinary happened in the United Kingdom – an event that is projected to have an enormous impact on both European and global trade. It is fair to say that the Brexit result came as a shock to all, including its supporters! Nobody seemed to have actually planned for it. The UK has been a member of the European Union (EU) since 1973, and now longstanding business arrangements will be disrupted, the food industry being no exception. There are many issues for the food industry to consider as we wait to see how the dust settles.
Photo Credit: Italian Food Net
Brexit's potential food industry issues and changes include:
- Competition regulation
- Rules on state aid and procurement
- Management of greenhouse gas emissions
- Management of water resources
- Waste disposal regulations
- Product/nutrition labelling
- Packaging and other product standards
- Safety standards
- Free movement of labor
- Human rights standards
- Rules on access to benefits, maternity leave, and other social benefits
- Working hours and conditions
- The Common Agricultural Policy (CAP) – UK farmers collectively currently receive a £2 billion (US $2.6 billion) annual subsidy from the EU
- Fisheries policy
- Customs tariffs
- Free movement of capital
- Free movement of goods
- Free trade within the EU (28 countries with over 500 million people)
- Joint trade negotiations with other countries around the world.
Food Prices and raw materials
A number of factors may contribute to a rise in food and ingredient prices as a result of the recent Brexit vote. The UK is heavily reliant on its trade with the EU in particular for food and benefits from 53 Free Trade Agreements (FTA) that the EU has secured. Tariff-free market access is key to controlling operating costs, and ultimately food and ingredient costs internationally.
Labor shortages and supply
Apart from access to markets, the food industry must have continued access to labor to maintain output and meet market demands. About 27% of the UK’s food and beverage manufacturing workforce are (non-UK) EU nationals. Access to cost-effective labor is crucial to managing profitability. Labor shortages would impact not only the UK but also companies that rely on raw materials, contract manufacturing, and imports from UK-based sources.
Added strain on food industry operations
We must remember that Brexit comes at an already financially challenging time for UK food businesses. Other concerns include cost of raw materials, regulatory stability, and investment plans. Uncertainty means that many investments are on hold. Furthermore, some companies are considering relocating their businesses to other countries.
Still other factors that will impact food prices include recent legislation such as the introduction of a national minimal living wage, a sugar levy (tax) on soft drinks, the new nutrient profile model, and environmental and waste targets.
We definitely live in a VUCA world -- volatile, uncertain, complex, and ambiguous. With Brexit looming the cost of doing business in the food industry may well provide a good example of ‘VUCA’ in the years to come.
The latest news from Prime Minister Theresa May and the new Secretary of State for Exiting the EU, David Davis, is that the trigger will most probably happen early in 2017. Until then, the global market should stay on alert for the latest developments in Britain’s approach to this monumental shift.
Founded in 1919, as an arm of Bristol University, the Campden site quickly became known as the leading UK authority on the processing of canned foods. The fledgling research station grew rapidly, moving into the new science of frozen foods in the 1950s and thereafter branching out into all areas of food processing and preservation. The original building (a feed pelleting operation constructed in 1900) now houses the administrative operation of the company and has been joined by extensive state-of-the-art laboratories, pilot plants and training facilities.