UK industry prioritizes expansion of export horizons amid Brexit uncertainty

10 Dec 2019 --- British industry is poised to stimulate export activity among its local businesses, calling this an “untapped potential” in lieu of shortened reliance on EU shipments ahead of Brexit. This is put forth in a new report issued by the UK’s Food and Drink Federation (FDF) and Spanish multinational bank Santander, which underscores the growth opportunities and challenges for the food and drink sector for 2020. The Food and Drink Industry Report 2020 looks at exports and the developing markets of China, India, Japan, UAE and the US, all of which are pegged by analysts to have seen considerable year-on-year growth.

“Export growth has long been a priority highlighted by the FDF given the significant untapped potential for UK food and drink around the world. This remains the case despite the uncertainties of Brexit,” Sarah Malone, Economic Research and Exports Policy Manager at FDF, tells FoodIngredientsFirst.

“The UK has reduced its reliance on the EU as an export destination, but it still accounts for 60 percent of UK food and drink exports. EU markets will remain an important destination given their proximity, the limited shelf-life of many products and similar consumer tastes,” she adds.

Brexit uncertainties are spurring heightened focus on new export opportunities for the UK.In the issued report, Santander’s export team provides an analysis of the potential and challenges around each global territory, together with essential information for any company considering trading with these harder-to-reach markets. The report focuses on five core areas – international trade, innovation, skills, packaging and regulatory changes – all of which provide both challenges and opportunities.

While year-on-year growth in the value of UK food and drink exports exceeded 11 percent in Q1 2019, the second quarter of the year saw a decline of 0.6 percent from the same period in 2018. Evidence presented by the analysts suggests that the figures reported in Q1 were significantly inflated by the impacts of stockpiling.

“UK food and drink exports have been a singular success in recent years, achieving strong year-on-year growth. But we start from a relatively low base, in that only around one-in-five of our food and drink businesses are exporters,” says Ian Wright, FDF Chief Executive.

“In some competitor markets, that proportion is much higher. Encouraging more businesses to overcome their concerns about exporting is a high priority for FDF and for our affiliate members at Santander. We are seeking to persuade the government to invest alongside us in more specialist support to help companies take advantage of more export opportunities,” he adds.

Exports to the UK’s top trading partner, Ireland, fell in value in H1 2018 for the first time since H1 2015. The analysis outlines that two key drivers of this decline were weaker exports of cereals and flours, and meat-based products. On the other hand, growth in exports to the UK’s remaining top markets (France, US, the Netherlands and Germany) has been positive.

Other key markets that have seen negative growth include Spain, Hong Kong and the UAE, where the value of a variety of exported products has fallen, including in sauces, ice cream, meat products and confectionery.

Meanwhile, all of the UK’s highest value exported products were noted to have grown in H1 2019, with whisky, salmon, wine, gin, and pork increasing by over 10 percent in the same period last year. Salmon, beef and gin have also all seen volume growth above 10 percent.

“It remains a priority for the UK to accelerate export growth to non-EU markets. Our industry has identified five priority markets targets – China, India, the Gulf, the US and Japan. Our latest Q3 exports report highlights the ongoing strength of UK exports to China,” Malone stresses.

Other report findingsThe UK food and drink sector currently lags behind others in terms of digital technology adoption.
The analysis outlines other important issues for the industry including increasing automation. The UK government’s recently published “Made Smarter Review” (an independent analysis of industrial digitalization) highlighted a potential £55.8 billion (US$73.5 billion) value to the sector over the coming decade through digital technology adoption but pointed out that food and drink lags behind other manufacturing industries.

The impact of new digital technologies is quickly gathering pace and is gaining prominence across all industry spaces. In an analysis report last month, FoodDrinkEurope outlined that 24 percent of food companies that have seen concrete results from the adoption of digital technologies reported an increase in their employee numbers. Twenty-seven percent of food businesses across the EU have appointed a Chief Digital Officer.

Sustainable packaging and diet and health are also highlighted in the FDF-Santander report as areas where industry is committed to making a difference, working alongside or ahead of the UK government to drive change.

“As the UK’s largest manufacturing sector, contributing £31.1 billion [US$40.9 billion] to the economy annually and employing 450,000 people, the food and drink industry is a vital element of UK business and output, both domestically and internationally,” says Andrew Williams, Head of Food and Drink Sector at Santander UK.

“Despite an uncertain UK economic environment and the continual need to invest in technology and innovation, huge opportunities remain to sell more great British food and drink, in particular overseas. It’s key that we identify how best to harness this growth potential and improve productivity. We are delighted to be supporting the industry and this FDF report by showcasing those opportunities overseas,” he emphasizes.

By Benjamin Ferrer