Where Next for British Produce Post-Brexit?
April 1, 2017 | 4 min to read
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As I write this column, the British government just announced it intends to formally notify the European Union on March 29, 2017, of its intention to exit the EU by invoking Article 50 of the European Union’s treaty.
There are many issues that need to be sorted out, and there is an initial two-year period in which to do so. Many political commentators say this is too short a period, but the British government insists it is achievable. Time will tell.
Post-Brexit has brought attention to the opportunities for British companies to develop exports away from Europe. There are also other key areas, such as the role of migrant labor, and the opportunity to shape new policy in key agricultural areas. It’s quite an agenda.
Britain will need to negotiate trade access with a plethora of new countries, including the United States. This will clearly take time and resources to achieve. And even with good tariff and non-tariff access, the job of building exports to emerging markets in Asia and the Middle East, understanding customer and market culture, as well as the actual route to market itself, is highly demanding.
For the U.K., it seems unlikely that it will be exporting huge volumes of produce. The country still needs to import large volumes to meet its own market requirements. Where the U.K. might be able to see more success is in the provision of technical skills and products, as well as educational/training services — areas it is inherently strong. Many leading U.K. agricultural and food universities are developing joint ventures in Asia to meet this opportunity.
While some sectors of the British economy have done well in terms of exports in the past 10 years, food and drink exports, while growing impressively, are still pretty modest. Total U.K. food and drink exports are worth around US$15 billion per annum.
In terms of fresh produce, the U.K. exports approximately US$250 million per annum. These are dwarfed by fresh produce imports into the country that are worth around US$4 billion per annum. Europe is by far the biggest supplier to the United Kingdom.
The importance of imports and exports to the rest of the EU only underlines the importance of the U.K. being able to negotiate continued favorable access to the European market. One would hope that large produce suppliers to the U.K. from within the EU would want to retain access to the country. Anything that disrupts this trade could have serious consequences for the supply of produce to the U.K. market.
For the U.K., it seems unlikely that it will be exporting huge volumes of produce. The country still needs to meet its own market requirements.
Another question that begs consideration is who will work the farms? It is estimated that as much as 65 percent of farm labor in the U.K. is from other EU countries. In the food processing sector, the employment of foreign workers is also prevalent. It is estimated that up to 40 percent of all labor in this sector is foreign. Anything that makes it more difficult for farming and food companies to find the right type of labor will not help an industry already under pressure.
Post-Brexit will see the opportunity for the British government to develop its own policy regarding the production and use of genetically modified crops. With very little activity presently, it could take anywhere from five to seven years for a policy to be developed. Life science companies would need to carry out extensive R&D work to develop crops that are applicable to the growing environment. There may also be concern among consumer groups and with retailers/leading foodservice companies regarding the use of genetically modified technology in agriculture.
The quick completion of the U.S.-EU trade deal is now open to debate with the election of Donald Trump. To secure a trade deal with the United States, the U.K. will be forced to start the talks all over again. Being outside of the EU means that the country could negotiate deals with China, India and Latin America, based on its own priorities. Countries in Latin America and the United States might see this as an opportunity to not only supply products, but create competition among domestic producers.
What’s next for the United Kingdom? The road is unclear. Agricultural policy could begin to focus upon further moves toward market-oriented policies with lower levels of support than previously seen. The U.K. Treasury will cover any shortfall in payments made under the Common Agricultural Policy (CAP) — subsidy and support programs operated by the EU — to farmers, but this is limited to the end of 2020. There are no guarantees what payments will be made thereafter.
What we do know is it will be a challenging two years — and more — for the U.K.’s produce sector. As the government starts to show how it will approach exiting the European Union, it is possible to assess what some of the outcomes might be. This allows businesses to begin to plan accordingly, although the next two years will surely bring some twists and turns, and will add to a general feeling of uncertainty at the macro level in the agri food sector.
John Giles is divisional director of Promar International, the value chain consulting arm of Genus plc, Basingstoke, Hampshire, England. He has worked on fresh produce assignments across the United Kingdom, as well as in Latin and North America, Africa, the Middle East, India, China, SE Asia and Oceania. He is also the chair of the Food & Agricultural Group of the Chartered Institute of Marketing. He can be contacted at [email protected].
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