The Future of Food: After Brexit

The Future of Food: After Brexit

No Belgian can tell you what to put in your Full English Breakfast, but what will the cost of sovereignty be?

In the short term, it’s likely food prices will take a hike in the UK following the Brexit negotiations. Read on, keyboard warriors out there angrily preparing for a Brexit battle in the comments section below.

Immediately, the drop in the value of the pound will push up the price of imported food. In simple terms, say the exchange rate was £2= €1, for a €1 apple it would cost 50p (excluding all the added costs along the way). If the pound were to fall to £1= €1, it would cost £1 for exactly the same product. 

After the pound stabilises, at whatever level it eventually does, speculation about the longer-term effects on post-Brexit Britain also gives reason for caution.

The UK is a net importer of food, with trade in and out mainly with European nations under EU rules. Combined with a growing population and limited space on our island, this is unlikely to change. The free access to the Single Market appears to be off limits to a future independent Britain, making trade tariffs, at least to some degree, likely.  Although in the short term food and drink exporters will enjoy a boost from the weak pound, UK companies and citizens will keenly feel the extent to which border measures are put up.

Has Theresa May bitten off more than she can chew?
Food produced domestically will encounter rising costs- everything from the ingredients producers buy from the EU ( the mushrooms bought from Ireland in a ready meal), to materials (the plastic for packaging products) and even the oil and electricity used to run factories and farms. Costs, costs, costs. Rather than have these costs eat through their profits, producers will try and pass them on to their customers. This will not only make food and drink produced in the UK more expensive for us, but also less competitive abroad.
These import costs won’t just affect the food producers, they will also be felt directly by us at home. The price of food and drink imported from the EU, which makes up 40% of all food consumed in the UK, will rise to cover the costs of any tariffs.
 
But why do we have to purchase from the EU?
What about the grub produced around the world? It is true; the UK will now probably be able to import food from many nations that have not been able to meet the regulations or overcome the tariffs the EU enforces. Most notably, this will mean opening up America. What America will now be able to offer the UK is food at low costs. Cheap food, made cheaply. For us consumers, this could be good news; low-priced products imported from the US will replace more expensive food made in the EU.
However, the US’ generally more relaxed attitude to standards and regulation, combined with their simply eye watering economies of scale, certain sectors of the UK Food and Drink industry could be under real threat of being flooded. This is called a food ‘dump’, something the EU is particularly sensitive to. In 2016 last year China were the super villains of the world steel industry, ‘dumping’ excess steel in Europe at an unfairly low price. The EU shmacked them with a 73.7% import tariff to protect steel producers in the EU. Fast forward to the beginning of 2017, and the EU has been pulling the same trick. South African poultry farmers are on their knees since Europe started shipping our excess supply of chicken joints out at cut rate prices. The largest, RCL Foods, laid off 20% of its workforce and sold 15 of its 25 farms in February. The US is one of the biggest producers of corn and cows in the world, and the UK will soon be an untapped market for them. A US food dump is a reality that must be addressed if the UK is to weather the Brexit storm.

The US are less stringent on food regulations, most notably allowing GM. 

Our farmers face the danger of being caught between a rock and a hard place if they lose out on the substantial subsidies they currently receive from the EU. In 2015 UK farmers received €3’084 billion (around £2666 billion), with a further €5.2 billion (£4.5 billion) already committed to rural development projects until the end of 2020. What happens after this is one for the fortune-tellers. At the end of 2016 Phillip Hammond pledged to pay out to the UK farming sector the amount they would have received from the EU Common Agriculture Policy (CAP), but only until the end of 2020. Bearing in mind we don’t actually leave the EU until sometime in 2019, this seems a pretty weak pledge. If it were your livelihood, the ice would be looking pretty thin. On top of this, the dreaded Red Tape of the EU would still have to apply to any food or drink product intending to make its way into an EU nation. All the regulations, none of the cash.

To take an example on our side of the pond, Cornwall stubbornly, and some might say ironically, voted heavily in favour of Brexit. While its tourism sector will receive a boom this summer, with UK holidayers firmly looking to stay at home (again because of the value of the pound), Cornwall’s farmers have a bumpier road ahead. Other than the pockets of tourism, Cornwall is predominantly a rural county. Due to its EU classification as a “less developed region”, it has access to one of the biggest slices of Brussels’ development aid pie.

They should be counting their lucky stars that they have the ear and heart of Cornishman George Eustice, Minister of State for Agriculture, Fisheries and Food.

                   An Angry Cornishman                                                                                  RH George Eustice MP

 

The UK needs foreign labour.

Post-Brexit, it may become harder to attract foreign labour, which our agriculture sector in particular is very much reliant on. Around 100’000 migrant workers make up over a quarter of the workforce in food and drink manufacturing. In agriculture it’s estimated at a smaller number, around 22’000, but a higher percentage of the overall sector, at 38%. Free movement of labour for EU nationals into the UK is by no means a certainty, making both farmers and food manufacturers shake in their green and white wellington boots. As already mentioned, even with relatively easy migration laws, if the pound continues to fall the UK will begin to lose its reputation as an economic tourist destination. With a weaker pound it becomes financially less worthwhile for migrant labour to work in Britain. Apparently we don’t want them to take our jobs now, but in the future it maybe the case they don’t want them either.

There are certainly some dark clouds on the horizon to be grappled with, and the future of UK food will depend on the ability of three politicians. Phillip Hammond, the Chancellor of Exchequer, must maintain a stable pound and stable, growing economy, while avoiding food price inflation. David Davis, Secretary of State for Brexit, must ensure minimal trade barriers between the UK and the EU, and reassure migrant workers they will be both allowed and welcomed to work in the UK. Finally George Eustice must pull hard on the tails of the other two to fight for Food and Drink and the Agricultural Sector, making sure they are not cast aside as the UK Government’s negotiations battle on.

Whose hands the US hot potato falls on is anyone’s guess, it could be time for Foreign Secretary Boris Johnson to earn his living and bring home the bacon. What is clear however is that these three men, under the responsibility of PM Theresa May, will be accountable. Perhaps they should take a moment and find the balls to block America, the nerve to stand up to the EU, and the sense to support UK farmers; the future of our food depends on it.

 

Archie Sale

 

 

 

 

[1] https://research.rabobank.com/far/en/sectors/regional-food-agri/Brexit-likely-to-inflate-UK-food-prices.html

[2] http://www.ifr.ac.uk/waste/Reports/food%20matters,%20Towards%20a%20Strategy%20for%20the%2021st%20Century.pdf

[3] https://www.theguardian.com/business/2016/oct/07/european-union-import-duties-chinese-steel-port-talbot-tata

[4] http://www.euractiv.com/section/trade-society/news/south-africa-and-eu-spar-over-chicken-meat-dumping/

[5] https://www.ft.com/content/aaecb834-6092-11e6-b38c-7b39cbb1138a

[6] https://www.ft.com/content/aaecb834-6092-11e6-b38c-7b39cbb1138a

[7] http://www2.cipd.co.uk/pm/peoplemanagement/b/weblog/archive/2016/07/04/brexit-threatens-more-than-130-000-jobs-in-food-and-drink-sector.aspx#

[8] http://www.ahdb.org.uk/documents/Horizon_Brexit_Analysis_20September2016.pdf