2020 has managed to shift the attention from Brexit to COVID-19 as the global pandemic resulted in drastic changes in the way businesses operate and created a great amount of uncertainty and fear amongst both employers and employees. The UK officially left the European Union on 31st January 2020 with the ‘withdrawal agreement’ deal followed by an 11-month transition phase which ends on 31st December 2020. As the deadline quickly approaches, it is now the time for businesses to focus again on how Brexit will affect them.
The food & drink industry is doing well but Brexit is approaching
The food & drink industry is the UK`s biggest manufacturing sector – larger than automotive and aerospace (combined) while the food supply chain employs around 4 million people and generates over £121 billion of added value to the economy each year (Food and Drink Federation, 2020). The industry managed to prove its sustainability and adapted to crucial COVID-19 trends such as increased food safety, new hazards controls and, most importantly, the shift in consumer preferences.
Brexit, however, is on the doorstep and the fact that there is little to no clarity on the outcome and its implications, it may cause additional unexpected uncertainty and costs to businesses. As the extension deadline for negotiations has now passed, the UK and EU are left with only two options – agree to a deal with or leave without one. Of course, agreeing a deal will be beneficial for both parties but we have already seen a few deal rejections and negotiation extensions so, at this point, no-deal Brexit looks more likely. Let`s consider the possible consequences.
Change in import and export tariffs
Generally, country members of the European Union enjoy zero tariffs on imports and exports between them. In the case of a No-deal Brexit, the UK would become a 3rd party country and be required to pay export tariffs defined by the EU (euronews.com, 2019). Conversely, the UK will set its own tariffs for imports into the country. Additional border controls, regulations and documentation will also be required which would also lead to additional costs and longer processing times. Fresh food supplies may decrease as companies may choose to leave the UK market due to tariff driven price increases which may in turn lead to shortages of ingredients.
Shortage of staff
The travelling between the EU and the UK will become more complex as visas and passports will be required. Additionally, EU citizens are required to apply for a ‘settlement scheme’ which the UK government might reject resulting in many EU citizen going back home. This situation might find food manufacturers short of staff which again would create additional costs and may impact food quality as well.
Electricity and gas shortage
Many EU energy and gas suppliers might leave the UK market and following the ‘demand and supply rule’ when demand is higher than supply, the prices go up.
What`s next – time for action
Overall, another uncertainty is going to hit the UK business world very soon and firms should prepare for the worst-case scenario. Food manufacturers may consider switching to local suppliers to avoid incurring additional costs and improve stability. Switching to a local gas provider should also be considered as even if it is more expensive, it would provide stability and certainty. Finally, the food manufacturing industry is known for its high employee turnover and most companies already have experience dealing with this. However, strong forward planning, close monitoring of developments and communication with employees should mitigate a degree of the uncertainty surrounding Brexit.
Who are we?
Founded in 1988, Lehmann Foods Ingredients Ltd is a family run business and an established importer and distributor to the food, drinks, pharmaceutical and cosmetics / personal care industries certified to the BRCGS Agents & Brokers Standard.
How can we help through the Brexit transition and beyond?
Dependability – alternative trade agreements on products and safety stock available on key lines at our warehouses (UK & Ireland)
Market Presence – we have companies in England, Northern Ireland and Ireland that give us strategic knowledge of the Irish market, the current border concerns and its developments
Trusted – we recently retained our BRCGS AA Grade, ensuring whatever happens, food safety and quality of ingredients will remain our highest priority
Author: Dian Velkov
Marketing and Social Media Manager, Lehmann Foods Ingredients Ltd