Is a no-deal Brexit really off the table? UK MPs vote on delay, while industry slams new “confusing” tariff regime

14 Mar 2019 --- In the latest twist in a monumental week for Brexit, UK MPs have rejected the idea of leaving the EU without a deal. They voted in UK Parliament yesterday, by 312 to 308 to reject a no-deal Brexit under any circumstances – but as this is not legally binding and under current law, the UK could still leave without a deal on March 29. The fact that a no-deal has been rejected has not quashed the mounting concerns of many in the food and beverage industry and agri-supply chain because a no-deal remains the default option if nothing else can be agreed. These fears have been escalated further after a new temporary tariff regime was announced which many believe could cause trade distortions and market disruption.

The House of Commons (HoC) first voted by a margin of four to reject a no-deal outright, then there was another vote where that decision was reinforced by 321 to 278 (a majority of 43).

Yesterday’s vote happened just hours after the UK government revealed a temporary zero tariff regime for a no-deal scenario following UK Prime Minister Theresa May’s Withdrawal Agreement, which sets out an orderly exit from the EU, being overwhelming rejected in the HoC on Tuesday. 

And in the third vote of the week, MPs are due to gather in the HoC again today, to vote on whether to ask the EU for permission to delay the date for departure by extending Article 50 – something the UK food industry is calling for to give businesses, which are particularly susceptible to the trading challenges a no-deal represents, more time to prepare for the departure. 

The food industry will be watching closely as there could be a short or longer extension to the date the UK is due to depart the EU. And May could then call for a third vote to try to get the backing she needs for the Withdrawal Agreement despite MPs already rejecting it twice. MPs voted by 391 to 242 votes to reject May's deal earlier this week and in January, when it was massively voted down by MPs in a historic defeat that saw May facing a further vote of no confidence which she later won. 

Is the UK’s new temporary tariff regime “ill thought out”?
If the UK does leave without a deal, the government has pledged to set the majority of import tariffs to zero while maintaining tariffs for the most sensitive industries within the food, beverage and agricultural space. However, the industry has hit back claiming businesses cannot adapt to this new regime in just two weeks. 

However, tariffs would still apply to 13 percent of goods imported into the UK, which includes a mixture of tariffs and quotas on beef, lamb, pork, poultry and some dairy to support farmers and producers who have historically been protected through high EU tariffs.

Meat Industry Ireland says the proposed approach on tariffs and import quotas in a no-deal scenario presents a “massive threat” to Irish meat exports to the UK, particularly for beef. 

“The fact that the political disarray is driving us in the direction of this cliff-edge Brexit is a real concern for our export business. A long extension is now needed to avoid a ‘no-deal’ exit,” says Senior Director of Meat Industry Ireland, Cormac Healy. 

“Irish beef exports to the UK would face tariffs that will undermine the viability of trade and is also being presented with a very restrictive import quota regime. The UK proposals suggest tariffs ranging from approximately €1,500 (US$1,697) per ton on manufacturing beef up to over €2,500 (US$2,829) per ton on steak exports. This level of tariff would severely undermine trade,” he adds. 

“On top of this, the UK Government has proposed zero tariff import quotas, that on the one hand fall massively short of existing beef import volumes entering the UK market and on the other hand open these quotas to all global suppliers. Very quickly we can expect to see erosion of our position in the UK market in both volume and value terms, due to stiff competition from lower-priced beef from other regions of the world,” Healy explains.

He also points out that with just days to go before the Brexit deadline, processors face the risk that meat from animals may not be able to enter to UK market or if it does, the market return will be seriously devalued due to tariffs.

Also responding to the vote on taking no deal off the table, Helen Dickinson, Chief Executive of the British Retail Consortium (BRC), says that until a solution is found that can command the support of the HoC, it’s impossible to guarantee that a disastrous no-deal is avoided.

“Businesses face mounting costs with every passing day as they try to mitigate the disruptive effects of leaving without a deal. A no-deal Brexit is bad for businesses, bad for consumers and bad for the country. If MPs wish the British public to avoid higher prices and less choice on the shelves, they must consider any option which secures a transition period after the withdrawal date,” she says. 

In a statement sent to FoodIngredientsFirst, FoodDrinkEurope says: “We do not welcome the introduction of any tariffs and this worrying development threatens revenue of Europe's food and drink companies, the status of SMEs and jobs across Europe. It is for this reason that we recommend a suitable agreement be reached, and a no-deal Brexit be avoided.”

Another day of drama is expected as MPs vote later in London – and there is likely to much more debate and reaction in the days ahead if the chaos ensues. 

By Gaynor Selby