Brexit - What has changed for the food industry? This article examines Brexit's food industry impact on UK food imports, wholesalers, and...
7 Ways Brexit Affects Food Trade
Brexit has impacted all parts of the UK's sector including food trade, this article covers 7 ways Brexit affects UK food trade.
Following the decision of the UK to leave the EU, there was no definitive blueprint as to what new trading relationships would look like between the UK and the EU, even with more than 50% of food currently being imported by the UK. The general view from published sources at the time was that the food industry would be the most economically disadvantaged of all sectors.
On December 24, 2020, the UK and the EU struck a provisional free-trade agreement that ensured the two sides could trade goods without tariffs or quotas. Before Brexit, products moved freely across the border between the UK and other EU member states. While the deal allows tariff- and quota-free trade, UK to EU trade still faces customs checks, meaning commerce is not as smooth as when the UK was a member of the EU.
Highlighted below are seven ways Brexit affects food trade in the UK:
Increase in the cost of raw materials: The lower value of the pound as a result of Brexit will lead to higher costs of raw materials. This increase cannot be curbed by switching to local supplies, and the rise will be passed to the consumer, through an increase in food prices.
- Longer time to process deals:
Although there will not be any tariffs levied or restrictive quotas imposed, there will be a whole new series of regulatory checks and stringent local requirements. This will slow down the overall process of supply chains leading to additional costs and delays when trading. These costs and checks extending the trading timeline could lead to a corresponding rise in food prices, and as a result, healthy food may be considered too expensive, which in turn could affect the nation’s health.
- Increase in food supply chain costs:
As stated earlier, there are additional processes, timelines and costs now in place before food supplies can reach shelves, and in the long term, there will be fairly significant changes in the ways that the UK and EU interact when producing a product. These extra costs eventually become absorbed by retailers or consumers.
- Relocation of businesses
The changes as a result of Brexit could lead major food companies to reconsider establishing their businesses in the UK. Some may choose to relocate elsewhere in the EU or downgrade their operations in the UK to upgrade their presence elsewhere.
- New policies
The food and drink industry directly employs about 400,000 people across 6,320 businesses. It is estimated that 130,000 of this 400,000 workforce originates from the EU. Since food manufacturing employs vast numbers of workers lacking certain skills relating to food supply chains, there might be a cause for revisiting some contracts and policies dealing with the customs border.
- Increase in food prices
Currently, one-third of food manufacturing workers are from the EU. Switching to a reliance on British workers would impact wage bills and ultimately result in food price inflation.
- Global imports
Food supplies could potentially be sourced more cheaply from outside the EU by the UK no longer being subject to the EU’s common agricultural policy. Also, as Brexit affects the UK’s agriculture sector through a loss of farming subsidies, manufacturers are likely to be impacted by the availability of ingredients, which in turn could give way to cheaper import options from other countries.
In summary, the potential impact of Brexit on the food and beverage sector is huge, be it on trade, labour and employment or policy regulation, and it might take some time to adjust to these changes.