UK food and drink exports recovering from COVID-19 impacts in non-EU markets, flags FDF

02 Sep 2021 --- Sales of UK food and drink to non-EU countries were up 13 percent, accounting for 46.6 percent (£4.3 billion (US$5.9 billion)) of all UK food and drink exports in the first half of 2021, driven by a return to growth in China, Singapore, Australia, Japan and the Gulf region.

This increase means non-EU exports are now almost back to pre-COVID levels, according to the Food and Drink Federation (FDF).

In other non-EU markets, including Central and South America, sales to some countries have doubled since H1 2020. The fastest-growing major export markets in the region were Colombia, Mexico, Chile and Brazil.

This increase has been driven by a recovery in whisky and vegetable oils sales, supported by increased demand for other UK products multiplying from a much lower baseline.

Products of animal origin were heavily impacted, with a significant fall in pork, cheese, and chicken imports.COVID-19 headwinds
Despite the return to growth in these countries, overall sales of UK food and drink are down £2 billion (US$2.7 billion) compared to pre-COVID levels because of a sharp drop in sales to the EU. 

A combination of impacts of the pandemic and barriers to trade resulting from new arrangements have led to a drop in exports to the EU of more than a quarter since H1 2019. 

Exports to nearly all EU member states fell significantly, including a loss of more than £500 million (US$689 million) in sales to Ireland. In contrast, sales to Germany, Spain and Italy are each down around half since H1 2019.

Imports from EU “badly” impacted 
UK imports of food and drink were down nearly 10 percent in the first half of 2021 compared to pre-COVID levels. However, imports from non-EU markets increased during this period. 

Imports from the EU were particularly badly impacted by the pandemic and the new trading relationship, falling nearly 15 percent since 2019, a loss of £2.4 billion (US$3.3 billion).

The loss of UK exports to the EU contributed to reduced demand for EU ingredients in UK manufacturing. At the same time, import substitution by UK manufacturers and retailers also had an impact. 

Imports from the EU are likely to deteriorate further in 2022 after the UK’s full border controls are in place. Products of animal origin were heavily impacted, with a significant fall in imports of pork (-19.6 percent), cheese (-17.6 percent) and chicken (-17.9 percent).

Supported still needed
The return to growth in exports to non-EU markets is welcome news to the FDF, but it doesn’t make up for the disastrous loss of £2 billion (US$2.7 billion) in sales to the EU, flags the organization.

“It demonstrates the serious difficulties manufacturers in our industry continue to face and the urgent need for additional specialist support,” says Dominic Goudie, FDF’s head of international trade.

UK supply chains The fastest-growing major export markets were Colombia, Mexico, Chile and Brazil.
At the same time, the FDF is seeing labor shortages across the UK’s farm-to-fork food and drink supply chain, resulting in empty spaces on shop shelves, disruptions to deliveries and decreased production. 

“Unless steps are taken to address these issues, the ability of businesses to fulfill vital export orders will be impacted,” Goudie highlights. 

“So many factors continue to impact on the drop in value of UK food and drink exports, with supply chain challenges and the inability to connect face to face with customers adding to the difficulties,” adds John Whitehead, Food & Drink Exporters Association (FDEA).

The FDEA’s support to its member community is “a valuable resource to identify new opportunities and accelerate new market entry,” he continues. “It is therefore pleasing to see growth in sales to non-EU countries.”

“However, this in no way replaces the loss of £2.2 billion (US$3 billion) in sales to the EU since 2019. There is growing evidence that the complexity of trading with the EU has led to businesses moving operations into Europe and of importers looking for alternative suppliers, contributing to the ongoing decline in both UK exports and UK jobs,” Whitehead concludes. 

In July, the FDF reignited stark warnings over escalating food prices if manufacturers are forced to absorb the cost of proposed government policies connected to health and sustainability during the next few years. 

Earlier in the summer, exports of food and drink to non-EU markets topped sales to the EU in the first quarter of 2021. EU sales fell by 47 percent compared with Q1 2020 as a result of the ongoing impacts of COVID-19 and changes in the UK’s trading relationships. 

Meanwhile, Santander UK published a report together with the FDF revealing that Britain’s overall exports fell by 9.7 percent in 2020 when compared to 2019, with the total value falling to £21.3 billion (US$29.7 billion). 

Edited by Elizabeth Green