A ‘hard-Brexit’ could throw the UK’s food and drink industry into chaos, warn insiders

The UK’s Prime Minister Theresa May will have been relieved to hear Michel Barnier, the EU’s chief negotiator, say a Brexit deal could happen by November. The news will come as a light at the end of the tunnel for the beleaguered UK leader as Conservative MPs threaten rebellion against her Chequers Brexit plan and openly discuss challenging her leadership.
Yet, a possible Tory revolt is not the only thing that might turn May’s stomach. The possibility of a no-deal Brexit and the likely fall-out for many of Britain’s key industries is slowly dawning on politicians and experts alike in the UK. One major worry is the potentially chaotic impact on the UK’s food sector.
The industry counts as the UK’s biggest manufacturing sector and, since the British Government posted certain ‘technical notices’ in August of what a no-deal Brexit could mean, industry stakeholders have been scrambling to assess what the impact could be.

Labour shortages loom

For years, Britain’s agricultural sector has relied heavily upon migrant labour from Eastern Europe to fulfil vital ‘unskilled’ jobs, such as fruit picking, crop harvesting and abattoir work. However, as the Brexit deadline looms, the UK has become a less favourable destination for foreign agricultural workers for a number of reasons.
As many of these roles are seasonal, EU migrant workers would be unable to demonstrate sufficient residency to gain ‘settled status’ which would enable them to stay in the UK following Brexit if they so wish. What’s more, uncertainty over the nature of the UK’s departure from the EU and the fall in the pound have made working there a less lucrative prospect for many migrant labourers.

Migrant workers shun the UK

“The UK is no longer the best country to make more money [in] than at home,” explains Paul Brown, head of the food and drink sector group at law firm Anderson Strathern and a keynote speaker at the Scotman Newspaper’s conference last year on the topic.
“Previously, Bulgaria and Romania were the key labour sourcing countries for UK agricultural seasonal workers, looking for guaranteed jobs and higher wages. Now, Romania and Bulgaria both have jobless rates below the EU 28 average, so having to work abroad for months on end, for less money than before, is no longer so appealing.”
As such, a labour shortage is likely to mean competition for workers, higher wages and thus rising costs across not just the British farming sector but also in food production and the hospitality sector, says Brown.

The difficulty will be in solving this problem, as a House of Lords European Union Committee report on the impact of Brexit on agriculture highlighted last year, especially as many British workers are unwilling to take on these unskilled roles.

Farming needs to attract British workers

“Many of the roles undertaken by EU workers are what UK workers consider to be undesirable jobs, often in unpleasant conditions and in agriculture terms, in rural areas, all for the National Minimum Wage,” Brown explains.
“They are assumed to be unskilled jobs but as the House of Lords report points out, many of these roles do, in fact, involve a considerable degree of skill. Crop handling and harvesting do require particular skills. Having skills with a knife is essential to abattoirs. Such skills are often ignored.”
It is unlikely that technology will solve this issue entirely – not all crops can be harvested solely mechanically, for example. What is required, argues Brown, is a charm offensive and training programme designed to make the sector more appealing to British workers.

‘Major food disruption’ could ensue

“At present, we in Britain do not have sufficient labour to address the shortfall,” says Brown. “We will therefore [need] to establish ways of continuing to allow non UK workers to work in the agri-food industry but also to encourage UK workers to become more involved in this industry or there will be major food disruption.”

What’s also needed, says Brown, is a rethink of the nature of many of the jobs agricultural workers do. “We will need to reappraise how we classify the work undertaken by those workers,” he says.

“We have to be innovative in assessing and recognizing what actual skills are involved in the multitude of jobs that make up the food and drink sector,” he says.

“Now is the time that we must invest in training of our own workforce and to make the food and drink sector a more attractive employment proposition and a career of choice.”

Rising UK food prices to create two-tier food supply

UK food & drink industry snapshot. Source: WillisTowersWatson.com

The resultant labour shortage and likely wage cost increases caused by a lack of migrant workers could have other worrying knock-on effects, according to a new study. Rising food prices following Brexit could mean create a two-tier food supply.
In May a House of Lords Report warned that of a ‘two-speed’ Britain where poorer consumers were forced to live on cheaper, low quality imported food and drink due to an expected rise in import tariffs of 22%. Fruit and vegetables in particular would see price hikes because around 40% of vegetables and 37% of fruit are imported into the UK.
What’s more, poorer shoppers could be forced to buy cheap foreign meat produced to lower standards because of spiralling domestic food prices, claims research by ResPublica, an independent think-tank, sponsored by the British Poultry Council, which estimates labour costs in Britain’s poultry sector could rise by 50%. In such a scenario, only the rich would be able to afford fresh UK-bred chicken.
Currently Britain is the fourth-largest poultry producer in the EU and is around 60% self-sufficient, but UK consumers tend to prefer white meat, with around 70% of British dark poultry meat exported to the EU.
“The UK could increasingly become a country divided by its consumption of food,” says ResPublica’s report. “When the increased costs of production are passed on to consumers through higher prices, lower-income consumers may be left unable to afford fresh British chicken, instead having to rely on cheaper, lower standard meat imports from countries like Brazil and Thailand.”

Brits fear chlorinated chicken imports

Researchers are particularly alarmed about reports that senior Government advisers could “suspend food controls if there are any delays to imports of perishable foods at our borders”, as well as fears that standards could slip if the UK imports poultry meat from non-EU countries.
Concerns have long been raised by British food experts over likely imports of chlorinated chicken from the US, where it is a legal requirement to wash or spray poultry carcases with chlorine dioxide to reduce contamination by bacteria. This process was banned 21 years ago in the EU and, ResPublica points out, clashes with the “‘farm to fork’ model prized by British consumers” and therefore the traceability of British poultry.
“If the Government is serious about making Brexit work, then it is essential the UK finds a workable deal with our EU partners,” said Philip Blond, ResPublica’s director.
“If that fails, we risk creating a dangerous two-tier system, where the rich will be able to afford the increased cost of production necessary to maintain the highest standard, while those on low incomes will have little choice but to accept poultry with inferior standards, such as chlorinated or from countries where the use of antibiotics is unregulated and unmonitored.”
The heavy use of antibiotics by certain foreign suppliers is a particular worry, says Joe Cowen, co-author of the report, particularly given growing concerns about antibiotic resistance. “Antibiotic use [in the poultry industry] is endemic in Thailand, while Brazil, another major exporter of chicken, has significantly lower standards than the UK. Recently we saw 20 factories shut down over night, due to poor practices,” he says.
Meanwhile, losing access to the EU’s food monitoring infrastructure could also expose British consumers to lower food hygiene standards, says Cowen, while it could take a long time for the UK to re-establish its own.
“Crashing out of the EU without a deal, means we would lose much of the EU external infrastructure that allows us to monitor and inspect the food we eat and how it is prepared,” he says. “While it is possible to construct our own regulatory system, given the glacial pace of the Government around all elements of Brexit, it seems unlikely this would happen before we are due to leave next March, exposing consumers to food produced to lower standards.”

Delays to organic exports

Another issue worrying British farmers is the potential for major border delays to exports to the EU or worse, no exports at all. The National Farmers Union (NFU) warned last month that the EU could actually bar British farmers from exporting food into the EU following a no-deal Brexit.
In particular, the Government issued regulatory information suggesting that UK organic farmers might only be able to export their produce if they were certified by an organic body recognised by the EU to operate in the UK. However, the difficulty is that applications to these regulatory bodies can only be made once Britain becomes a so-called “third country” and approval can take up to nine months.
Chris Atkinson, head of standards at the Soil Association, one of the UK’s largest organic certification bodies, described a no-deal Brexit as the worst case scenario for Britain’s organic farmers, raising concerns that “imports and exports to and from the EU may be held up for months.”
Meanwhile, the NFU’s president Minette Batters described the Government’s statements as a “sobering reminder of what is at stake for farmers”, and suggested that the impact of a no-deal Brexit could be felt beyond the organic sector.
“The technical notice for organic farming is a warning for us on the future of trade of all agri-food products – if all these products were subjected to the same problems in approvals and certification then this could result in effectively a trade embargo on exports to the EU,” she says.
“Not only would this be hugely disruptive but it threatens livelihoods and businesses in the UK.”
Indeed, describing a no-deal EU exit as a “grisly prospect for UK food and drink”, the UK’s Food and Drink Federation (FDF) warns that other UK farmers, besides those that are organically certified, may also have issues with EU exports.
“Specifically for food, [the] notice about organic food certification makes clear that UK organic exporters may face a ban on their exports to the EU for at least nine months after a no-deal exit, while new approvals for certification are sought,” explains the FDF’s chief executive Ian Wright.
“These issues apply far more widely than just to organic food – any UK food that currently displays EU marks or logos will be in the same boat.
“Moreover, the UK food industry will doubt that the Government could replace TRACES (the EU Trade Control and Expert System that tracks the entire trade and certification process for animals, food, feed and plants) with a new, comprehensive, functional UK alternative IT system in time for the end of March.
“The new burdens potentially facing food and drink exporters and importers…will frighten many SME food businesses.”

Concerns about food self-sufficiency in ‘Fortress UK’

Food self-sufficiency is another problem worrying industry experts and politicians alike. While farming is the ‘bedrock’ of the UK food industry, according to the National Farmers Union, contributing £111bn a year to the British economy and providing 3.8m jobs, Defra (Department for the Environment Food and Rural Affairs) figures show Britain’s farmers are only currently able to produce 60% of the country’s food and this is in a state of long-term decline.
In 2016, 30% of food imports came from the EU, which explains why the Government is currently busy stockpiling food.
According to the NFU, Tuesday 7th August marks the day in the British calendar when consumers’ food cupboards would run out of stock if they ate only British-produced food from the beginning of the year.
This issue is particularly pertinent with the Brexit deadline looming next March, says the NFU’s president Minette Batters. “The statistics show a concerning long-term decline in the UK’s self-sufficiency in food and there is a lot of potential for this to be reversed,” she says.
“And while we recognise the need for importing food which can only be produced in different climates, if we maximise on the food that we can produce well in the UK then that will deliver a whole host of economic, social and environmental benefits to the country.
“The UK farming sector has the potential to be one of the most impacted sectors from a bad Brexit – a free and frictionless free trade deal with the EU and access to a reliable and competent workforce for farm businesses is critical to the future of the sector.

Food producers stockpiling ingredients

Cadbury owner Mondelez, among many other food producers, recently revealed that it is stockpiling ingredients, biscuits and chocolates to prepare for a hard Brexit. Hubert Weber, Mondelez’s European boss, told The Times that the UK is “not self-sufficient in terms of food ingredients”.
“Like the whole of the food and drink industry in the UK, we would prefer a good deal that allows the free flow of products, as that would have less of an impact to the UK consumer,” he says.
“However, we are also preparing for a hard Brexit and, from a buffering perspective for Mondelez, we are stocking higher levels of ingredients and finished products, although you can only do so much because of the shelf life of our products.”
Weber also warned that UK consumers could see higher prices and fewer food choices if no Brexit deal became a reality. Higher production costs in farming and food production alike would most likely be passed onto consumers if they could not be absorbed by the industry.
In March, Harry Smit, a senior analyst at Rabobank and author of Future Food Security in the UK: the Impact of the Brexit on Food and Agribusiness in Europe and Beyond, told the Guardian newspaper: “UK consumers should brace themselves for some price rises – perhaps by as much as 8% – on those products for which Britain is almost solely reliant on the EU.”
However, supporters of Brexit, such as sugar producer Tate & Lyle, albeit now owned by American Sugar Refineries Inc and one of the only major UK employers to campaign in favour of leaving the EU, say EU tariffs and quotas actually inflate its raw material prices by E40m a year.

No deal not an option

As the pressure mounts on Theresa May and her cabinet colleagues, a no deal Brexit looks increasingly like a non-starter for the UK food and drink industry, say insiders. “As the consequences of a no-deal exit from the EU become ever clearer it is vital that, to protect the interests of shoppers and consumers, the Government must deliver a deal with the EU,” says the FDF’s CEO Ian Wright.