With all the furore surrounding a no deal Brexit, one question that keeps being asked is how it will impact the UK’s food manufacturing industry. Will the price of food skyrocket? How reliant are we on the EU for food imports? Can the UK’s food industry take up any slack from lost imports? These are just a few of the important questions that are critical to the agriculture and food manufacturing industries, and below we’ll try to provide some answers.
To understand where the UK is heading, we first need to build a realistic picture of our starting point. Import figures for the UK vary, but according to the National Farming Union (NFU), we currently grow 61% of the food we eat. We import a vast amount of food and raw ingredients, over £23 billion in the first half of 2018 alone.
A lot, but not all of the food we import is because we don’t have the climate or infrastructure required to produce a meaningful quantity of the food ourselves. There are obvious examples of food we can’t produce, such as exotic fruits like bananas and mangoes, as well as certain spices, coffee, and tea.
We also import a lot of food we could potentially produce ourselves. In fact, according to the Agriculture and Horticulture Development Board (AHDB) we import over £3 billion worth of vegetables, excluding potatoes.
If you take into account that 79% of all our food imports come from EU countries, then you can see why this is troubling to many in the industry. We do import a lot of food from non-EU countries, but there are a couple of factors that will make this more difficult after Brexit.
Firstly, a lot of our trading outside the EU is done based on trade agreements made by the EU. These will no longer apply to the UK after Brexit, leaving us to trade on more expensive WTO terms until we can agree our own trade deals with each country.
Secondly, the pound has already dropped since the referendum. It’s expected to drop even more once Brexit finally takes place. This makes the relative cost of imports more expensive. Therefore, we will be paying more money for the same amount of goods, meaning that either businesses will struggle to make a profit or have to pass this cost directly onto the consumer.
According to the president of the NFU, Meurig Raymond, “We will never be self-sufficient in food production in the UK. The population is rising and there is a huge demand for crops that cannot be grown here, society has grown used to so much being available all year round. Can we increase self-sufficiency? Definitely.”
There are advantages and disadvantages to becoming more self-sufficient. The more we produce at home the less global volatility will impact our prices. There is definitely room for growth within the UK’s food manufacturing, farming, and horticulture industries. We already have a very competent workforce in the UK, so investing in the expansion of these sectors, by investing in the skills required, will help to take up some of the slack.
More agriculture will require more land. To achieve this in a way that doesn’t destroy wildlife and is eco-friendly will be a challenge. Consumers must also expect a higher level of self-sufficiency to come at a cost. While some of the food we import can be produced in the UK, we generally import it because it’s more cost efficient. Exotic foods we cannot grow in the UK will go up in price by a greater percentage.
Processed foods are also likely to increase in price, as those imported will be subject to higher tariffs, while the processed foods we produce in the UK will see an increase in the cost of the raw ingredients.
While the cost of raw materials is likely to increase, advances in automation are reducing production costs and increasing efficiency. There will undoubtedly be some companies that have failed to prepare for Industry 2.0 or Brexit, and they will struggle. While we expect to see some bankruptcies, we also expect to see new companies appearing and existing ones expanding.
Those that invest in their own workforce and technology will be in the strongest position to serve the changing needs of the UK.
Prior to The Sterling Choice I spent my earlier life in the Insurance industry (don’t judge me). I started The Sterling Choice with Gareth back in August 2013. When I look back to our h...