Continuity plans for Brexit: how are food producers preparing for a No Deal
At Collectiv Food we deal daily with thousands of food producers in the UK, Europe and non-EU countries. In the last few weeks, and as a No Deal Brexit becomes more and more a reality, we have seen the temperature rise across our network of producers.
The UK is hugely reliant on food imports from the EU, with around 30% of food consumed here coming directly from European countries. A lesser-known fact is that the majority of British food producers source raw material or packaging from the EU. The weak pound has already had an impact on these producers and has highlighted how many British companies have a foot in the European market at some point of the supply chain. Switching to purely British produce is therefore closer to a myth, as customers will soon realise in the case of a No Deal.
The real impact of a No Deal
We hear from our British producers that they are currently stocking up on packaging and raw materials where possible as part of their contingency plans. They already had to do so earlier this year, as the original Brexit deadline was looming in spring. Brexit being delayed meant that trade went on as usual, but by then producers had ramped up high production costs. This situation is repeating itself yet again this autumn.
Manufacturers have been told to prepare for a significant increase in raw material by the end of September 2019. They are strengthening their ties with UK farms to be able to switch their sourcing from abroad to domestic sources.
EU producers are setting up legal offices in the UK, and in turn UK producers are doing the same in the EU.
Long term contracts might be disrupted under force majeure clauses. In these cases, prices will adapt to market prices at the time of supply rather than be the agreed and locked-in prices. These could be subject to weekly or even daily fluctuations.
There are expectations for two difficult weeks around 31st October and producers are factoring in delays due to transport, customers or vets.
EU producers will dispatch their goods earlier to their UK customers (up to one day in advance) and use ferries as much as possible to avoid traffic jams out of France. Customers can expect a slightly shorter shelf-life on their products while the situation settles.
Meat trade forecasts
For imports, non-EU beef will be a serious contender for EU beef. In particular, Australian beef could have a real advantage as it has extremely high-quality standards, winning trust in the consumer market over North or South American products.
For exports, the lamb market faces serious issues. 85% of British lamb is destined to EU markets: by closing that output we will be left with an overstock of British lamb. Insurance companies might well have to pay producers to cull their stock.
In the long term, as 50 to 60% of lamb producers are heavily reliant on single farm payment subsidies, they will be heavily hit by the withdrawal from the EU. Big farms could rush to buy the smaller, family-run lamb farms, weakened by the geo-economical market shifts. We could quickly go towards consolidation and loose diversity and competition in this sector.
Pork prices keep on rising steeply as an effect of Chinese demand. Between January and June 2019, UK pork product shipments to Asia increased by 56% and Asian markets now absorb 35% of total UK pig meat exports. This global demand scenario coupled with Brexit will ramp up not only European pork prices but also British ones. Customers will feel the effect of this sooner rather than later.
Possible solutions in the short term
Similarly to other suppliers trading across borders, Collectiv Food has applied to the HMRC’s Transitional Simplified Producers (TSP). TSP for customs will make importing easier for one year in the event of a No Deal, as a transition measure while business processes adapt to the new situation.
We are confident we can support our UK based customers in the turmoil that inevitably will happen around 31 October. Our agile sourcing methods allow us to quickly find new product solutions for our customers, helping them in their business continuity plans. We have already given our independent advice to some of our customers on how to diversify their sources in a sustainable and risk averse way. Also, our agile delivery model, where goods are in and out of a warehouse in the quickest time possible, will help get fresher products over to our customers, even in the face of all the expected delays.
Food trends for restaurant professionals
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