Brexit’s impact on the food industry
The British food sector faces one major struggle. One-third of overall food consumption is imported from Europe, through a supply chain which is highly vulnerable to portside delays. This is combined with a low-margin domestic sector which relies heavily on immigrant workers and export to be profitable. All these factors are made harder by Brexit as it further slows down the imported goods – due to paperwork -, puts more pressure on the domestic sector to supply the country and limits the entry of immigrant workers, and makes export harder and more expensive, slowing it down and reducing profit in the process.
Market figures
By the end of 2021, Brexit has added about 6 billion pounds to the United Kingdom’s food bills. This is caused by a rapid increase in the food price imported from Europe, which adds 210 pounds to the average household’s bills. This increase disproportionately affects low-income households as percentage wise they spend a larger amount of their income on food. It is estimated, that the cost-of-living increase fell anywhere between 1.1% and 52%.
By November UK food price inflation hit a record high of 12.4%
Trade figures show misguidedly show comfort to the market as global exports grew strongly in the first half of 2022 which even exceeded pre-covid levels. However, these reports fail to mention a collapse amongst small businesses, and reconstruction by more prominent companies, who are trying to compensate for the 15% to 20% increase in costs of exporting goods to continental Europe.
Brexit’s impact on the British food industry
The United Kingdom signed a trade deal with the European Union – in December 2020 – which would maintain a tariff-free trade but would ensure new boundaries – customs, paperwork, regulatory standards, and regular checks of products -. Trade figures show misguidedly show comfort to the market as global exports grew strongly in the first half of 2022 which even exceeded pre-covid levels. However, these reports fail to mention a collapse amongst small businesses, and reconstruction by more prominent companies, who are trying to compensate for the 15% to 20% increase in costs of exporting goods to continental Europe.
While exports are down 5% – compared to 2019 – imports from mainland Europe are up by 22%. This doesn’t surprise experts, as exporters have to face increasing costs and the bureaucratic maze of health and safety checks, and paperwork to be able to go through full border checks, which have been postponed for imports. This sets a potential trend for the future, where selling overseas is set to decrease further.
It is estimated that specialty food imports could face a 70% decline – the same faced by small business exports after Brexit – as these trade barriers would impact these businesses the most due to them needing to import small amounts frequently. Dealing with the UK will become more expensive for exporters, meaning they will increase prices for their products.
Exports to EU and non-EU Countries I Office for National Statistics.
What does the future hold for Britain’s food industry?
Apart from Brexit the United Kingdom’s government also hinders the industry? There have been recently toughened rules regarding animals, notably requiring each animal from which meat product, offal or hide comes to have a regular inspection by qualified vets, finished with a paper confirmation. As 70% of the exported meat goes to the European Union, these businesses will likely suffer as there is a lack of qualified vets within the country. This could result in farmers – who rely on selling every part of an animal for profit – could be left with parts, that they can’t sell domestically as it is not needed. This would put further pressure on prices within the United Kingdom so they can make up for the lost revenue. While they might need to increase their prices, their domestic market is booming as they can better compete with foreign companies due to the increased prices of imported products.
Exports are the same time have been and will likely continue to plummet. Food and drink exports were down by 24% – 2.4 billion pounds – by September 2021.
These government decisions are backed goal of reducing health risks caused by sick animals. However, if prices shoot up because of it, an already existing issue could expand further, smuggling. This poses more than a regulatory issue; it is a safety risk to all citizens as there have been reports of maggot-ridden meat being seized.
United Kingdom Goods Trade I Deloitte
As a trend, it seems to be that small business and low-income households are suffering the most from Brexit. However, it wouldn’t be fair to blame Brexit for all these changes, as COVID-19 and Brexit happened very close to each other, making it difficult to identify the different impacts they each had on their own. This being said this shouldn’t take away from the fact that Brexit has made it significantly more difficult to import and export goods, while also causing a price increase. As Brexit still didn’t implement some of the goals it set out to do – as it takes a long time to set up the prerequisites and come up with the legislation – it is still hard to tell how exactly it will impact the market, but one thing is for certain, it puts more pressure on the government in an already difficult time to aid its small businesses and citizens who are struggling due to these new boundaries.
References
- THOMAS H. (2022): “The rotten state of Brexit for the food industry” I https://www.ft.com/content/d8b93ff1-57b7-48d4-bcdb-33c6f81a583e
- O’CARROLL L. (2022): “Brexit added nearly £6bn to UK food bills in two years, research finds” I https://www.theguardian.com/politics/2022/dec/01/brexit-added-nearly-6bn-to-uk-food-bills-in-two-years-research-finds
- SPECIALITY FOOD (2022): ”How Brexit will impact the food sector in 2022” I https://www.specialityfoodmagazine.com/news/brexit-impact-food-sector-in-2022#:~:text=New%20import%20rules%20hit%20speciality%20retailers&text=For%20those%20small%20businesses%20directly,by%20small%20businesses%20after%20Brexit
