Crucial Brexit votes: UK secures “legally binding” changes to deal, food industry watches with bated breath

12 Mar 2019 --- It’s crunch time yet again for UK Prime Minister Theresa May today as MPs prepare to vote for the second time as a crucial part of the ongoing Brexit process. UK-EU negotiations have taken a major step forward after May secured “legally binding” changes to the deal following last-minute talks in Strasbourg last night. May stresses that these changes mean the backstop, designed to avoid a hard border in Ireland, could not become permanent and claims that these changes will now satisfy Parliament. And now, despite being urged to call off today’s vote in the House of Commons in case of another huge defeat, May is pushing ahead with trying to get the backing needed on the Withdrawal Agreement which sets out an orderly exit from the EU. However, if she doesn’t succeed there could be more votes this week that could see Parliament voting to extend Article 50 and rule out a no-deal Brexit.

There are still concerns that, just like the previous vote held in January, May will suffer another defeat as polarized politics still seem to reign supreme. The Withdrawal Agreement was massively voted down – rejected by 432 votes to 202 – by MPs in a historic defeat that led to May facing a further vote of no confidence, which she went on to win. 

It’s now less than three weeks before the Brexit deadline of March 29 and May needs a majority of MPs to back the deal that has already gained the support of European counterparts. 

The food industry, which is particularly susceptible to the trade challenges a no-deal Brexit scenario would represent, will be watching closely. Industry leaders across all segments and sectors have been lobbying for greater clarity on Brexit for months, amid serious concern over a multitude of issues that would come with a “catastrophic”  no-deal. These include higher food prices, food availability, tariffs and delays caused by border controls and many more. 

Food and Drink Federation (FDF) Chief Executive Ian Wright says that businesses will have to continue planning for a cliff-edge scenario until the March 29 date is removed from the Withdrawal Act.

“A three-month delay would provide a little more breathing space, but it could also play havoc with careful supply chain and logistical planning based on a March 29 exit and the seasonal availability of ingredients and warehousing space,” he comments on the possibility of an extension. 

Such a delay may also mean three more months of diverted time, effort and investment. “Based on the last three months – which have at times been shambolic – the food and drink industry will seriously question what the Government could achieve by extending the Brexit deadline for such a short period of time,” he notes. 

A Barclays report also warns 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 chain face a mass of additional tariffs as a result of the UK not negotiating a trading deal with the EU. 

Earlier this year, a Rabobank report also 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.

Last month, the UK food industry threatened the British Government with breaking off cooperation at this time of “potential crisis” as the countdown to Brexit continues. Business leaders of more than 30 trade organizations within the UK’s farming and food and drink supply-chain, wrote a warning letter to Environment Secretary Michael Gove, saying that businesses are now “totally focused on working to mitigate the catastrophic impact of a no-deal Brexit” with large amounts of time, money, people and effort being diverted to that end – and it cannot be “business as usual” within government.

Gove responded by suspending food industry consultations and reforms – which sees delays on policy-making on chemicals, pesticides, plastics, clean air, waste and possible reforms on food-related matters – thus allowing the food and beverage industry to concentrate of Brexit issues.

The Secretary General of the European Dairy Association has also warned of the “catastrophic” impact that a no-deal Brexit scenario would have and Irish headquartered Kerry Taste & Nutrition “anticipates that a managed transition will be the most likely outcome of the negotiations.” 

A company statement on Brexit reads: “The Group 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.”

Brexit has been a key point of discussion among suppliers and distributors with UK exposure. For example, FoodIngredientsFirst recently reported on how Kreglinger Specialties is stockpiling enough product in the UK for the first three months after March 29, in preparation of a “no deal” Brexit. 

The packaging sector is also heavily exposed. Speaking to our sister publication PackagingInsights recently, Director for Plastic and Flexible Packaging at the British Plastics Federation (BPF), Barry Turner explained that uncertainty around exports, investment decisions and the supply of raw materials could cause significant disruption to the packaging industry.

But today’s vote may finally bring more clarity on the direction that the UK is headed. Speaking at a press conference earlier this morning, President of the European Commission, Jean-Claude Juncker, said: “We agreed on a joint legally binding instrument relating to Withdrawal Agreement. This provides meaningful clarifications and legal guarantees on the natures of the backstop, which is an insurance policy, nothing more, nothing less. The intention is for it not to be used, like in every insurance policy.”

“Having an insurance policy to guarantee that there will never be a hard border in Northern Ireland is absolutely right – it honors the UK’s solemn commitments in the Belfast/Good Friday Agreement. But if we ever have to use that insurance policy, it cannot become a permanent arrangement and it is not the template for our future relationship,” May said in a speech following last night’s talks with Juncker. 

“The deal that MPs voted on in January was not strong enough in making that clear – and legally binding changes were needed to set that right. We have agreed them.”

Senior Conservative officials were advising May to replace today’s vote with a motion setting out the sort of deal that would be acceptable to Conservative MPs. However, this would, in all likelihood, still be dependent on further concessions from the EU. Meanwhile, Europe has made it clear that it’s up to the UK to go forward and decide the next steps for Brexit. 

It’s not just today that is important for the future of Brexit. This week could potentially move things forward or backward, depending on what happens today. 

If May’s deal does not survive today’s vote and indeed gets rejected as before, there will be a vote on a hard Brexit, likely tomorrow (March 13). Reluctantly May has also stated that in the event of Parliament not agreeing with a hard Brexit, there will be another vote by March 14 where MPs will decide on whether or not to delay Brexit. The Prime Minister stresses the focus must be on achieving a deal and leaving the EU on March 29.

Are the assurances enough?
The two key documents that have now been agreed include the “joint legally binding instrument” which would allow the UK to start a formal dispute against the EU if it tried to keep the UK tied into the backstop indefinitely. The second changes relate to a commitment to replace the backstop with an alternative by December 2020. Heading into the vote in London later today, the big question is “do these new assurances address the concerns of UK MPs enough to convince them to support the current Brexit deal?” 

The food industry will continue to watch on in the hope of some clarity on this seemingly endless discussion. 

By Gaynor Selby