Brexit impact: UK Government suspends food industry consultations and reforms

20 Feb 2019 --- The UK Government has bowed to pressure to delay policy making on chemicals, pesticides, plastics, clean air, waste and possible reforms on food-related matters, following last week’s “no-cooperation” letter from the food industry. More than 30 trade organizations within the UK’s farming and food and drink supply-chain threatened the Government with breaking off cooperation at this time of “potential crisis” as the countdown to Brexit continues. The groups state that it cannot be business as usual during no-deal preparations.

The letter explained how industry was in full crisis management mode preparing for a no-deal Brexit and there was no time, physical resources nor organizational bandwidth “to engage with and properly respond to non-Brexit related policy consultations or initiatives.”

Now, as UK Prime Minister Theresa May meets with the President of the European Commission, Jean-Claude Juncker, UK Environment Minister Michael Gove has agreed to suspend a series of reforms amid the protests from trade businesses and organizations spanning the agriculture, dairy, nutrition, bakery, meat, fresh produce, coffee and cereal sectors. 

Gove’s reply comes with less than 40 days left to the UK leaving the EU on March 29. In his letter, he acknowledges that Brexit preparations are time-consuming for the food industry which is accelerating its preparation as the Brexit deadline is approaching fast. Gove also agrees to prioritize work so industry representatives can focus all efforts of this and agreed to a more flexible consultation process. 

In particular, there will be no immediate consultation on chemicals and pesticides strategies, there will be no consultation on environmental targets before the summer recess and there will be an extension in relation to Resources and Waste consultations. 

However, there are now concerns that postponing or pausing domestic policies will be harmful in other ways too, delaying domestic policy on other key issues. 

Kath Dalmeny, Chief Executive of the Sustain Food and Farming Alliance, says: “We are sympathetic to the extreme costs and uncertainties posed by a no deal Brexit, a scenario we oppose because it is likely to be so damaging to our food and farming industries. However, it is troubling to see so much domestic policy being postponed by Brexit, at a time when children’s health continues to be at risk, insect populations are in crisis, and action on pesticides, waste, plastics, air quality and climate change grows ever more urgent.”

Barbara Crowther, Coordinator of Children’s Food Campaign also states that the Government must hold firm and not succumb to pressure to postpone action to act on childhood obesity, as they promised to do in 2018. 

“As charities and health bodies, we have far fewer resources than these massive food companies, and yet we are working hard to respond to all the government consultations. It’s up to them if they want to do the same. Government should not be bribed to delay its action on sugar,” she stresses.

The food industry and trade bodies have been highlighting their concerns over the lack of clarity about the terms of Britain's EU departure for many months now, as the industry becomes extremely susceptible to the impacts of a no-deal and the trading challenges that it presents. 

Earlier this year, FoodIngredientsFirst spoke with Alexander Anton, Secretary General of the European Dairy Association about the potential impact of a no deal Brexit on dairy. Anton explained how few sectors could be more prone to the impact of a no-deal Brexit scenario than dairy, with vast volumes of product moving between the UK and EU trading partners on a daily basis. 

Experts have also warned that the pan-European plastics sector will be the hardest hit in the event of a “no-deal” Brexit, while a Rabobank report has said that in the event of a hard Brexit, the UK will become a “third country” to the EU, which in practice, means that UK companies lose access to the EU market for exports of most agricultural products, due to the introduction of import tariffs at the EU border. 

This also closely followed a Barclays report (published in September 2018) which said that failing to reach a Brexit deal could end up costing £9.3 billion (US$12.2 billion) a year as food retailers and their supply chains face a mass of additional tariffs as a result of the UK not negotiating a trading deal with the EU. The Barclays report calculated widespread disruption and price hikes with the “hard Brexit” model forecast to create an average tariff of 27 percent for food and drink supply chains which is significantly more than the 3-4 percent levy that would hit non-food products.

And in January, another report from UK consumer research company NimbleFins examined the potential impact of “no-deal” tariffs on the average weekly shop of UK residents as well as the impact a hard Brexit would have on takeaway/restaurant spending. The results find that a year's worth of tariffs could come to the same amount as two weeks’ worth of groceries and money spent eating out – regardless of budget.

UK retailers also warn that stockpiling preparations are being hampered because warehousing space in Britain is running out. Earlier this year, the British Retail Consortium (BRC) wrote to the government setting out their major concerns over the significant disruption to food supplies which, they say, will be caused by a “no-deal.”  

The timing of Britain leaving the EU also makes the situation even more acute because of the seasonal challenges of growing fresh produce in the UK at this time of year.

As Brexit edges closer, many companies are stockpiling products in preparation for the disruption that could ensue. Kellogg’s and Mondelez are taking measures to protect customers from a potential shortage of key brands such as Pringles and Milka chocolate. Kellogg’s is also understood to be opening new warehouses and stocking up on its snacks and cereals and working with suppliers to make sure it has enough raw materials at its plants. 

It is important to note that much of the industry is still confident that a deal will be reached. For example, when announcing its results yesterday, a Kerry statement reads: “While there continues to be uncertainty with respect to the outcome of the UK’s exit from the EU, Kerry currently anticipates that a managed transition will be the most likely outcome of the negotiations.” 

However the company said that it has mitigation plans in place to limit the potential short term implications of a “no‐deal” scenario. “Kerry remains cautious on the UK consumer landscape, but is confident it will continue to outperform the market,” the group says. 

What’s next?
Today’s meeting in Brussels comes after UK MPs gave their backing for May – who is continuing to work to secure the legally binding changes that Parliament wants in relation to the Withdrawal Agreement – to renegotiate the policy with the EU in a vote earlier this month.

Labour leader Jeremy Corbyn is also having a meeting in Brussels with the EU's chief negotiator, Michel Barnier, on Thursday. 

By Gaynor Selby