Brexit and food: Impact on ingredients and start-ups could be particularly profound, notes industry chief

19 Mar 2019 --- UK business has failed to make its case in the Brexit process, which could have a detrimental impact on the thriving start-up atmosphere in the UK. While there will be some opportunities that can be taken in the event of Brexit, the ingredients sector could be particularly hard hit. This is according to Ian Wright, CEO of the Food and Drink Federation (FDF) who spoke to FoodIngredientsFirst at the International Food & Drink Event (IFE) show in London, yesterday.

With Britain potentially leaving the EU just 9 days after the end of IFE, how the UK food and beverage industry will continue its operations under this time of uncertainty was a hot topic at the show. IFE is attended by scores of UK businesses who are watching closely as the Brexit chaos continues. 

“What I think is worrying is Brexit’s impact on access to capital for innovative start-up companies and also, more practically, to ingredients. If there is real disruption across the borders one concerning aspect is getting ingredients in,” says Wright.

“Some things are very vital, such as types of yeast for bread. The other thing is, will it affect the capacity to get markets outside of the UK? The tariffs will be a barrier or they won’t, but marginal decisions won’t be made based on tariffs,” he adds.

The real issue is, Wright explains, is if you cannot ensure your customer continuity and supply, then there will be a big problem. This could potentially lead to a predisposition among UK and EU customers that anything from the UK will be difficult to get and therefore, they may seek other products. 

In this way, will Brexit hinder British food and beverage innovation? According to the Wright, who has been lobbying government over the challenges the food and beverage industry will face in a no-deal scenario for many months, the answer is “yes.” 

IFE hosted a "Big Debate" session on the topic of Brexit. Panelists from left to right: Ian Wright of the FDF, Will Jackson of the AHDB, Paul Hargreaves of Cotswold Fayre, Sandra Sullivan of FDEA and Rodney Hoinkes, Montgomery.After struggling to agree on how the UK should leave the EU, British MPs voted last week for a delay to the Brexit process. The Brexit process now faces further complications. Yesterday the House of Commons (HoC) Speaker, John Bercow, evoked a 400-year-old convention to rule out the possibility of Prime Minister Theresa May putting her Withdrawal Agreement to a third vote in Parliament, unless substantial changes are made first. May is understood to be meeting with her cabinet later today to discuss the next steps on Brexit. 

May’s Brexit deal faced a second overwhelming rejection in the HoC last week as MPs vote 391 to 242. This followed the first rejection in January.

Last week, UK MPs also rejected the idea of leaving the EU without a deal, voting by 312 to 308 to reject a no-deal Brexit under any circumstances – but as this is not legally binding and under current law and the UK could still leave without a deal on March 29. 

Potential opportunities?
During a debate session on Brexit at IFE yesterday (prior to the Bercow revelations) – which brought together a number of influential industry voices – Wright also highlighted some potential market opportunities for food and beverage companies that Brexit could bring. 

“What we have now in the UK is a huge amount of choice. So, there is some opportunity for people to think about what might become more expensive, and what ingredients may be in short supply because of disruption or tariffs. They could project this forward and envisage what could be a great market into which to make an intervention with a product that could meet the same needs,” he said.

The big debate: “Stop using Brexit as an excuse for business failure”
During the somewhat heated debate, Paul Hargreaves, Chief Executive of fine food wholesaler Cotswold Fayre, called upon business to stop using Brexit as an excuse for failure, citing the strong growth of Cotswold Fayre amid Brexit uncertainties.

“We can worry about the impact of Brexit, but it will happen eventually and the consumer demand [for products] will remain. The road will eventually be smooth. Plan for a no-deal if you want to – but we have not. Stop using Brexit as an excuse Ian Wright also spoke at the Brexit debate for the packaging industry, hosted at Pro2Pac which was situated within IFE.for business failure. If business isn't good, it's not because of Brexit,” he says.

Sandra Sullivan MBE, Director of the Food & Drink Exporters Association (FDEA) noted – following Hargreaves comments – that industry must not “stick its head in the sand.”

According to Sullivan, things are not good for companies who rely on exports as retailers are waiting for clarity on the situation. The uncertainty of Brexit may also impact where companies plan to locate their production in the future, and it’s likely that this could move further and further away from the UK to countries that have strong trading agreements in place with the EU. Sullivan previously spoke to FoodIngredientsFirst, highlighting that UK exporters desperately need clarity on the trading position they are facing.

The FDEA reports that in 2017 the EU’s 27 markets accounted for around 60 percent of UK food and drink exports worth £13.3 billion (US$17.6 billion). A new survey released by the group yesterday revealed how the attitudes of consumers and retailer buyers in EU countries such as Ireland, France, Germany and Spain are evolving. 

After having shown many years of loyalty to UK suppliers, uncertainty of the future trading relationship, lack of clarity on labeling requirements and the inability to guarantee tariff free prices for 2019 and beyond means new projects and wider investment plans have been put on hold. Many companies would normally have finalized their Christmas 2019 orders by now, but this is proving particularly precarious this year.

1,350 global food and drink manufacturers exhibited at this year's IFE.According to Sullivan, the number of British companies who rely on exports that attend the annual trade show in Amsterdam for private label brands (PLMA, May) was halved this year. This was because they were not being worked with by retailers amid the uncertainty Brexit has brought.

The FDEA notes that although there may be potential difficulties in exporting to the EU, exports to non-EU markets, especially to countries like Australia, Singapore, Japan and the UAE are continuing to grow. Exporters are starting to research new countries and customers to replace the business they fear they will lose in the EU.

“At the FDEA we have always encouraged companies to expand into new markets when the time is right for their business. It is not reassuring that in 2019 we find that many companies are looking for new markets, not to expand, but to replace business that they feel they risk losing in the EU in the current climate of uncertainty. We will be working closely with government to ensure that they provide strong support for our exporters in the months and years ahead,” the association said in a statement.

Brexit was, unsurprisingly, a topic that spurred concern and worry for many at the show, as well as disparate opinions. According to Wright, although he sees the reality of a no-deal situation receding, everyone should continue to plan for its potential reality. All eyes will continue to be on Westminster and Brussels in the coming days to see if some clarity can be gained.

By Laxmi Haigh