Brexit Unlikely to Ward Off Investment, Claim US Food Giants But Express Concerns About Tariffs and Quotas

27 Jun 2016 --- US food giants have offered support for the UK food industry following the country's decision to pull out of the European Union while Unilever and Nestlé have remained tight-lipped and others have stressed the importance that new trade deals must not be hamstrung by quotas and tariffs.

The vote to leave the EU is likely to have significant implications for the UK food industry, whether it be through new trading deals or the value of the British pound.

Today the British pound started the new week sharply lower following a weekend when no firm indication was given into how the UK and European Union will move forward following last week’s referendum vote.

Such volatility will not breed confidence for those wanting to invest into the UK food industry or those already in it.

According to the Food and Drink Federation in the UK, 71 percent of its members wanted to remain as part of the EU, citing concerns that they will have to agree to EU food regulation should they want to export to the EU.

A particular concern is that EU officials have been insistent they will make an example of the UK- perhaps through steep tariffs and quotas- to ward off other countries considering exiting the EU.

Yet for those UK food companies, which have little cross-trading between the UK and the EU, the impact of Brexit could be minimal.

Associated British Foods, for example, referred FoodIngredientsFirst to an earlier statement, saying: "We wouldn't be greatly affected by Brexit".

Some in the food industry, such as Nestlé, have acknowledged the referendum result but in the immediate aftermath have chosen not to offer an opinion except to say that it "will continue to operate in the normal course and will follow developments closely."

Nestlé, which employs around 8,000 people in the UK and exports worth around $530m, has previously said it would be forced to re-evaluate the extent of its presence in the UK if Britain decided to leave the European Union.

Nestlé chairman Peter Brabeck-Letmathe has said: “From a purely economic point of view, I can't see that the withdrawal of the UK [from the EU] would be favourable for any UK industries.”

"It would isolate the UK economically. Every company would be forced to re-evaluate the implications of investing in the UK. It would no doubt have an impact on its ability to supply European markets."

Likewise rival Unilever, which has been public in its backing of remaining in the EU, said it's too early to comment, though chief executive Paul Polman tweeted: "The most important thing to have long term prosperity is to accept the will of the people and respect democracy. Now we all need to unite."

General Mills and Mondelez, meanwhile, have given firm indication that they will continue to invest in the UK.

Mondelez said: “We are confident that we are well positioned as a business to navigate the consequences of the vote. As a business that sells products across the EU, we are closely monitoring the situation in terms of next steps. Our brands are much-loved by UK consumers and we remain committed to manufacturing in Great Britain."

General Mills said: "We remain committed to the UK and will to continue to serve British consumers with foods they love, to innovate our product offering and to invest in the local communities in which we operate."

Danish dairy co-operative Arla Foods, meanwhile, stressed the importance of any new trade agreement being reached without import and export quotas or tariffs "which will limit the free movement of goods".

Arla, whose biggest export market is the UK, said: “We are disappointed by the outcome of the referendum. However, we respect the decision by those in the UK and, ultimately, it is their choice to leave.”

“We have continually supported a well-functioned and strong EU which focuses on ensuring the continued free movement of goods, services, people and finances.”

"However, we will work with the UK government and other relevant stakeholders to maintain that in so far as we are able to, in the post-Brexit environment."

"The consequences of the Brexit vote will depend on the subsequent negotiations between the EU and the UK that tare expected to take up to two years to complete."

"For Arla, it is important that a trade agreement is reached without import and export quotas or tariffs that will limit the free movement of goods. We will be following these negotiations closely, and mitigation plans are underway by Arla but it's too early to comment on the many different scenarios that could arise.”

In Ireland, Teagasc has previously offered a dire warning in light of Brexit but Dublin-based Kerry Foods, speaking to the Kerryman, said: "We do have significant business in the UK of course, but the vast majority of it is domiciled in the UK and would not be unduly affected by Britain leaving the EU,"

"So the UK market is quite self-sufficient and while some of what we produce there is exported from the UK and while some produce is imported in from other markets, including Ireland, and while the outcome of a Brexit would affect the currency it would broadly balance out."

by John Reynolds

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