No-deal Brexit: “Rising costs could hinder competitiveness of UK food & drink manufacturers,” says FDF

02 Aug 2018 --- The UK Food and Drink Federation (FDF) has published the second of its new quarterly business confidence surveys revealing that more than three-quarters of manufacturers expect input prices to rise in the remainder of 2018. More than half of those polled had seen increased ingredient costs (62 percent), increased packaging costs (61 percent) and increased energy costs (51 percent) having the most significant impact on their businesses in the second quarter of the year. Positively, 54 percent of businesses had also seen an increase in sales in the UK, while 42 percent reported an increase in new product launches.

The UK’s future relationship with the EU was among the top three concerns of businesses polled with contingency measures seen as barriers to success for many. Increases in input prices were expected to continue in part due to exchange rate volatility.

Despite this, respondents felt general business confidence had remained static during the last two quarters (66 percent). With regards to the second half of the year, many companies said they were still looking to invest, with investment in new machinery and product launches two of the three opportunities identified by those FDF spoke with.

FDF Chief Executive Ian Wright CBE explains: “The shadow of a ‘no deal’ Brexit looms large over business confidence amongst the UK's food and drink manufacturing industry. This should come as no surprise – there are so many crucial questions to which businesses need answers.”

“Despite this, manufacturers remain resilient. It is encouraging to see so much future investment planned. Now, the Government must start providing the clarity needed to navigate unchartered waters as we look to prepare for our future outside the EU,” he notes.  

“There are so many different potential scenarios it’s difficult to say, things like the outcome of negotiations with the EU on future trade, whether we maintain access to existing EU FTAs and future agri support in the UK would all affect whether ingredients became more expensive post-Brexit,” Dominic Goudie, FDF Policy Manager (Exports, Trade and Supply Chain), tells FoodIngredientsFirst. 

FoodIngredientsFirst has been publishing regular updates on Brexit. Last week, a new report into food safety issues post-Brexit hinted that checks on vehicles transporting perishable goods could be suspended if there are significant delays at the border. In the latest Food Brexit Briefing, leading food policy specialists are urging the UK Government, food industry and consuming public to remain focused on food because a “careless Brexit” poses significant risks to food flows into and out of Britain. 

According to the report, the Government recognizes the serious consequences that may ensue because it is making contingency plans to suspend food regulations in the event of a “no-deal” Brexit. You can read the full coverage here. 

And earlier last month, FDF said that the UK food and drink industry needs help to “turbocharge” the sector’s exports and restore productivity levels to avoid falling behind other European countries once Britain has left the EU. An industry-wide report highlights the key growth opportunities for the food and drink industry, the UK's largest manufacturing sector which contributes £28.2 billion (US$37 billion) to the economy annually, employs 400,000 people and is a crucial part of the nation's £110 billion (US$144 billion) farm-to-fork food chain. You can read more on this here.