Life after Brexit: the future of British food and drink manufacturing
Regardless of the outcome of the June elections, the British food and drink manufacturing industry is set to face some tough challenges in the coming years. The current importing and exporting operational frameworks that businesses are currently relying on are likely to change after the UK leaves the EU.
The food supply chain employs over four million people in the UK and generates £100bn of value to the economy each year. Overall, the food and drink sector is the biggest manufacturing sector, with exports totalling more than £20bn in 2016. It is also an industry which relies heavily on an EU-workforce, with almost a third of its workers from outside the UK. It is easy to see how pre-existing links with the rest of the EU, which have served to boost the industry’s profitability in the past, now make it vulnerable.
The Food and Drink Federation (FDF) has tried to set the ground for a softer future by calling on the next government to put in place the policies it considers essential for delivering a thriving food and drink industry. In its manifesto the FDF demanded transitional arrangements to help the sector negotiate the possible changes to workforce, trade and regulation, and an immediate action to guarantee the right of EU citizens to remain in the UK. The FDF also requested a stable regulatory framework to maintain consumer confidence in the safety and authenticity of British food and drink.
Many experts see regulation as an area with potential to cause major disruption for UK firms after Brexit, as most regulation is currently governed under EU law. Experts from legal firm DWF have warned that a hard Brexit could increase logistics issues and infrastructure obstacles, as new border controls and documentation would be required, which might delay imports and exports of goods. A free-trade deal would be required to minimise the effect of bureaucratic delays on business, but agreeing to a deal before the UK has filled its existing commitments to the Union seems unlikely.
Without a free-trade deal, the EU will be in a position to impose tariffs on a range of food and drink products that member countries import from the UK. Farming could be among the sectors hardest hit: according to DWF, tariffs of 47% could be applied to the exports of British milk, 40% per cent for British cheese and 59% for British beef. Additionally, a report by the food and agribusiness bank, Rabobank, found that the cost of food and drink items typically imported from the EU countries into the UK, including ingredients such as olive oil and tomatoes, could rise by 8%. This might force the UK manufacturers to turn to domestic suppliers for their raw materials: while this might benefit the economy, the higher costs are likely to put an even greater financial strain on the manufacturing businesses.
However, even if the future looks turbulent, it is worth noting that the British manufacturing industry as a whole is still enjoying a good reputation globally. The Made-In-Country-Index 2017 rates the UK as the third most respected country of origin, just behind the fellow EU-countries Germany and Switzerland. What’s more, out of all the British products, food is the best respected commodity. The question is, how can the industry capitalise on this existing reputation in the build-up to, and even more critically, after Brexit?
Safeguarding the status of British food products is now more crucial than ever. Hard or soft Brexit, the food and drink manufacturers will be forced to build fresh relationships with new consumers, retailers and growers domestically and across borders to ensure survival and optimise profitability. Luckily this is something businesses can already prepare for by strengthening the processes that contribute to the overall quality and exploring new ways to add value to their offering.