Author: Hazel Davis of Highbrook Media, 7th June 2016

Brexit: five issues for the food and drink industry

Brexit - Food and Drink Industry

The EU referendum debate might get a little overcooked at times, but how will the food and drink industry fare if we vote to leave on 23 June?

A recent poll of Food and Drink Federation members found 71 per cent in favour of remaining in Europe. Reasons given included access to raw materials and the free movement of labour.

So how do those in the industry view the debate?

Turmoil

For some, uncertainty has meant putting plans on ice. Bermondsey-based food gift business BoroughBox was planning to start exporting but that now has to wait.

Managing director Andrew Lawson says: “We have put everything on hold until after the vote, much the same as I expect many are doing.”

BoroughBox provides the structure for 200 franchisees to sell their own produce from wherever they’re based. Lawson polled his sellers recently and found 60 per cent of them think leaving the EU will decrease sales.

However, he’s not personally convinced that Brexit would be as much of a calamity as advertised.

“There will certainly be fallout and change if we leave,” he says, “and there is no doubt prices will rise at first as a knee-jerk reaction, but that is natural and usually things balance back out.”

Trading places

The EU is the UK’s single biggest export market, accounting for 40-45 per cent of exports. That’s equivalent to around 12 per cent of UK GDP, according to Roger Tejwani, consumer analyst at broker finnCap.

He says: “A vote to leave would allow individual member states to block goods coming in from non-EU members and remove free circulation of UK goods which currently target 503m citizens across the [other] 27 member states of the single market.”

Regulation

The EU’s costly regulations on the food industry can be a struggle for startups. Oliver Barton, founder of sticky toffee pudding company Oliver’s Kitchen, agrees.

He cites BRC (British Retail Consortium) accreditation and SALSA (Safe and Local Supplier Approval) as examples of locally-applied regulations required by the EU.

“SALSA has an annual cost of £550 plus VAT, but with the help needed to get through the paperwork an extra consultancy fee of up to and above £750 is necessary. For a small business like mine, that takes a big chunk out of your cash flow initially.”

He adds: “BRC accreditation is far more expensive and comprehensive, with annual prices in the thousands.” Barton says regulation can be costly and take time to implement, something smaller businesses just don’t have.

But Jimmy Cregan, founder of the fast-growing food brand Jimmy’s Iced Coffee, takes a different view. “Most legislation, such as the requirement for allergen information on products, is there to help consumers and will need to be created by any governing body. It’s not been created to hinder businesses’ success.”

The danger, says consumer analyst Tejwani, is divergence from EU product regulation over the longer term. Those UK food and drink manufacturers wishing to export to the EU would face additional costs to meet compliance.

“Yes, Brussels undoubtedly enjoys red tape,” adds Tejwani. “But the rate of new regulation has been slowing in recent years. If the EU continues to be the UK’s biggest trading partner for the foreseeable future, the UK should remain on Brussels’ law-making table with regard to food legislation.”

Staffing

Some argue that Brexit could lead to an outflow of skilled personnel and with it their spending power. Tejwani says: “This could be combined with potentially stricter visa/work permit requirements for lower-skilled staff once the free movement of people no longer applies.”

Staff-wise, says James Lewis at Gauthier Soho, Tartufo and Gauthier Wines, Brexit would be a disaster.

He says: “A huge proportion of staff are EU migrants and we feel this gives a rich and diverse quality to the experience. The [25] migrants we employ work extremely hard, maybe because they have made a big effort to come here. We find it harder to find British workers with the same passion to succeed and rise in this industry.”

Lewis adds: “If we leave the EU it would be much harder for migrants to come to the UK and this industry and the economy would suffer terribly.”

Commodities

And then there’s the actual stuff we put in our mouths. UK food manufacturers source on average 40 per cent of fruit and vegetables and 55 per cent of pig meat from the EU, says Tejwani.

“A sustained period of uncertainty could promote capital flight, fear and a devaluation of sterling. Raw material and packaging prices would rise for UK food manufacturers.”

But those in favour of an exit think the proof of the pudding will be in the desertion. Barton of Oliver’s Kitchen says: “I have no doubt that an amicable agreement between the EU and the UK can be reached.

“The UK could also benefit from having the freedom to negotiate free-trade deals with countries outside the EU, such as the US and China, countries that the EU has not yet managed to seal deals with due to not being able to agree on how to please all 28 member states.”

Barton believes that if we were to leave, Britain could apply funding more precisely to the food manufacturing sector. He says: “At the moment any funding currently available cannot be directed to where it needs to be as the EU decides what the money is to be spent on instead of identifying the needs of businesses in this sector.”



This article has been compiled using information available to us up to 07.06.16


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