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Brexit: The immediate impact on food and agricultu...

Brexit: The immediate impact on food and agriculture

The UK exit from the European Union (EU) has led to immediate questions for the food and agriculture industry in terms of tariffs, quotas, and farmers’ support.

Any ‘divorce’ from EU systems will take time, of course – even the most generous time scales say this will be at least two years. However, the impact on investment will be immediate.

The effect on the exchange rate (pounds to dollars as well as euros) can already be seen. The pound has already dropped
8 per cent since it became clear a Brexit vote would occur, with the value at its lowest rate since 1985.

[Editor’s note: At the time of writing, the pound was about 2 per cent higher than the 31-year low reached in the aftermath of Britain’s vote to exit the EU Union in June.)

“Overall, it’s clear since the UK food industry is a large exporter to Europe, a lower exchange rate will be beneficial short-term,” Innova Market Insights London-based analyst Heather Johnston said.

“However, this also means dollar-denominated raw materials will be that much more expensive, as will imports – and the UK is one of the biggest import markets in Europe.

“Tariffs and quotas will not change immediately, but any negotiation is highly unlikely to bring better terms than previously as a member of the EU and, of course, if the UK wants to sell within the EU, CE standards (mandatory conformity marking for certain products sold within the European Economic Area) and all the other food safety, quality and nomenclature rules will still apply.”

The impact of the Brexit vote in the food and agriculture is likely to be profound. According to the Food and Drink Federation in the UK, 71 per cent of its members wanted to remain part of the union. Overall, most believed it is preferable to remain with the status quo. This is due to concerns that should the UK exit the EU, they will have to agree to EU food regulations should they want to export to the EU, but will have no role to play themselves in how regulation is formed.

Since joining the EU, the common policies held for agriculture, trade and movement of goods have been key to the UK’s food system. The Common Agriculture Policy itself swallows up 40 per cent of the total EU budget. In turn, the other nations of the European Union have been integral trade partners for Britain and have been the UK’s primary export market. Additionally, the British people depend on their fellow European states to provide a quarter of what they consume every year.

Because of these deep economic ties, many British leaders who oppose Brexit fear the trade repercussions the food and agriculture could face. Secretary of State for Environment, Food and Rural Affairs Elizabeth Truss said a leave vote would be a risky “leap in the dark” that could endanger the livelihood and success of the nation’s farmers and food distributors.

Ms Truss said the food and farming industry could benefit from an extra €360 billion in EU funding to help SMEs and larger processors grow their businesses. She pointed out that between 2011 and 2015, dairy companies in the UK invested just €468 million in their businesses, compared to €1.4 billion in Germany and €785 million in Ireland – highlighting the opportunities that additional funding could bring to the UK industry.

Few fellow EU markets will be more impacted by the decision than the Republic of Ireland. According to Bord Bia (the Irish Food Board) the decision by the UK to exit the EU represents a significant challenge to Ireland’s agri-food and agriculture. Bord Bia chief executive Aidan Cotter pledged Bord Bia would continue to support and work with industry to maintain and build on this vital trading relationship against the background of any new trading arrangements that will be negotiated.

Finally, the fallout from the UK’s exit from the EU will also be felt in the product development space. Other EU markets are the leading destination for UK food products and uncertainty about potential tariffs returning could impact exports.

But the UK has traditionally also been a beacon for new product innovation in the food industry, often driving trends in convenience and premiumisation, through its highly developed on-the-go market. With more isolationism occurring and potentially reduced exports, it’s possible we will see less creativity spread through to the continent too.


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