How Brexit Affects the Food Industry

The formal withdrawal of the United Kingdom from the European Union officially took effect on January 1, 2020. Caution must now be exercised and trends in all sectors of the national economy must be continually monitored, to enable the relevant stakeholders to make informed decisions. One area of the economy which merits scrutiny is the agriculture space.

BREXIT, UK FOOD IMPORTS, AND FOOD IMPORTERS

According to statistics recently provided by the Department for Environment, Food and Rural Affairs, over half of the food consumed in the UK in 2019 was domestically produced. This is more than twice the amount of food supplied to the country from the European Union within the same time frame, which constitutes 26%. It is interesting to note that the percentage of domestically produced food in this regard does not factor in exports. Additionally, the current food figures imported from European Union member-states are down 4% from what was reported by the House of Lords European Union Committee on May 10, 2018.

It appears that the percentage of food imported by the UK has been experiencing a slight but consistent decline since the start of Brexit. It also currently stands that food importers have to pay tariffs on food imported from the UK, in line with the World Trade Organisation rules. Customers will eventually bear the brunt of this new policy, in terms of increased prices and potential food shortages. Finished products on supermarket shelves do not solely make up the burden because local food manufacturers also rely on imported ingredients. The burden on customers may remain, even with trade deals.

Brexit regulations on the food industry continue to raise more obstacles. Before the payment of tariffs or import duties by food importers in the UK, food importers must also obtain an Economic Operators Registration and Identification (EORI) number. Without an EORI number, more money will likely be spent and more delays experienced. Food importers in particular also have to look out for the marking, label, and marketing standards that must be followed to bring in food. See 7 ways Brexit affects the food trade.

BREXIT AND UK FOOD MANUFACTURERS 

Following Brexit, food manufacturers in the United Kingdom appear to find themselves in two extreme positions. One may be quick to conclude that food manufacturers who had largely focused on the local market would have taken fewer losses than counterparts who were more tailored towards exports. However, that is left to be seen.

The United Kingdom's food (and drink) manufacturing sector is way more than a handful. It is the country's largest manufacturing sector, according to the Food and Drink Federation. Nearly half a million people across every region of the UK are employed in this sector. The wide reach of the UK's food and drink manufacturing sector is further demonstrated by the fact that 96% of the country's food and drink manufacturing businesses are small and medium enterprises (SMEs).

However, one area that calls for concern is the number of European Union member-states citizens that constitute the United Kingdom's food (and drink) manufacturing sector. They make up over a quarter of the entire industry, and a large number can be found in farming and food processing. By implication of Brexit, migration in this regard would become more difficult. This may hinder the entire sector from making its typical annual strides.

Another area of concern is the rise in food prices. Given the unstable nature of the pound in the wake of Brexit, local food manufacturers and exporters would also have to contend with higher costs of ingredients imported from European Union member-states. This can only be changed by introducing tariff reduction deals with countries within and outside the European Union. Nonetheless, deals of this nature takes time to materialise. With all that being said, Brexit's impact on this sector is undeniable.

BREXIT AND UK FOOD WHOLESALERS

Food wholesalers are equally influential to business and trade in the United Kingdom. There are roughly ninety thousand workers engaged in this sub-sector, well distributed all over the country. The wholesale distribution of food and drink churns out nearly thirty billion pounds. For what appears to be a sub-sector with not so many people engaged, this is a significant contribution to the UK’s food and drink sector and the country's economy as a whole.

Like other stakeholders of the United Kingdom's (UK) food and drink sector, food wholesalers in the country have also been adversely affected by Brexit. Since finished food products largely constitute what is imported, the tariffs in place have left the wholesalers with no choice but to shift the retailers' burden. These retailers have gone on to shift the burden to the final consumers. The unstable nature of the pound and the fact that products from the European Union member-states attract more import duties have also contributed to the challenging situation for final consumers.

It remains unclear whether there would be a shift towards more food products being imported from outside the European Union, due to lower import duties, but it is certainly an opportunity worth exploring.

The need to assess the impact of Brexit on food imports, importers, manufacturers, and wholesalers has become more pertinent in the wake of the COVID-19 pandemic, which surfaced at the end of the transition. Effective reporting in this regard depends on how soon the pandemic can be brought under control.

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