Whatever one’s views of Brexit and whether or not you were a “Remainer” or a “Leaver”, it is safe to say that most people – businesses and individuals – outside of the Westminster bubble just want to get on with our withdrawal from the EU. But what are the implications of Brexit on the food industry?
According to the Government, the processed food and drink sector is the largest manufacturing sector in the UK and contributes £28.8 billion to the economy. With other key statistics including:
- Exports were worth £22 billion in 2017 and they continue to grow.
- The sector directly employs 400,000 people throughout the country, a third of whom are EU nationals.
The sector is characterised by just-in-time delivery of products with short shelf lives and is heavily integrated with supply chains spread across the UK and the EU for sourcing raw materials, processing goods and selling them. Many manufacturers have factories in both the UK and the rest of the EU.
Clearly then it is crucial that the sector is able to remain competitive when we leave the European Union and remember, of course, that Brexit is not just a concern for UK food producers but also for any food manufacturer (EU and non-EU) serving the UK market.
Food is not like other sectors. With climate change and population growth threatening food security globally, keeping the UK’s farmers in business matters. Not just for economic reasons but also for more prosaic but equally important reasons like maintaining the landscapes. Therefore it can be argued that what is needed is an imaginative new system of subsidy that gives public money to farmers for public goods, or risk farmers leaving the land.
Let’s take a brief look at three key areas: Supply Chains, Legislation and Freedom of movement.
- The potential impact of a Brexit on supply chains
Supply chains could indeed be affected if tariffs are imposed between the UK and the other EU Member States. Currently, products move freely across the border between the UK and the other EU Member States and no tariffs apply. Following Brexit however, the food and drink sector could face significant EU tariffs and potential supply chain disruptions.
- What about EU food legislation?
Will the UK continue to apply EU food legislation, which has been adopted, harmonized and is directly applicable throughout the EU, or will it now start introducing its own or new rules?
There are something like 4,500 or so EU regulations covering food, farming and environmental standards that fall within the remit of the Department for Environment, Food and Rural Affairs (DEFRA). Whilst it’s true that Brexiters may hate the Brussels bureaucracy that dictates everything down to the size of olive oil cans, it must be recognised that many of these rules are necessary to protect from the sort of food safety scandals and frauds of the past. They are also what make trade deals and borders frictionless. Exports depend on this sort of harmonisation of rules.
- Freedom of Movement
Another critical factor, the ending freedom of movement, will almost certainly require the creation of a new layer of bureaucracy that can deal with the permits and visas for the estimated 500,000 foreign workers that farmers, food processors and food manufacturers say they must have to stay in business.
As the short review above shows this is a very complex, multi layered, multi-national problem and is likely to be so for years to come. However, business usually finds a way through what often look like intractable problems.