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What a no-deal Brexit means for the food industry

We are all looking towards the United Kingdom with bated breath. This is because the Brexit transition period, which already took place on 24 January 2020, ends on 31 December 2020. The new year is likely to bring drastic changes for the food industry. Especially when it comes to trade relations with the UK. Find out what a no-deal Brexit means for the food industry and what changes you need to prepare for here.

To trade or not to trade? That is the question

Let’s get into the problem with this modified Shakespeare quote: Because the question arises as to whether a trade agreement will come about by the end of 2020 or not. Leading players in the food and agriculture sectors warned of the serious consequences of a no-deal Brexit at the beginning of June this year.

And they are of a diverse nature: from rising costs to changes in the area of Food packaging Everything is included up to further bureaucratic effort. Tariffs, sharp drops in UK imports and disruptions in supply chains are also on the rise.

What is changing in terms of …?

… food packaging?

Even if it is not completely clear what is changing in the area of food packaging, the fact remains – new rules are needed. These relate to different aspects:

  • Labeling:

As soon as the UK leaves the EU, packaging must include manufacturer addresses from the country in which it is sold. Products made in the EU must have manufacturer addresses resident there for import and sale in the UK. The reverse is also true: companies from Great Britain who sell to the EU must be able to provide evidence of such addresses within the EU.

  • Eori number:

The acronym stands for E. conomic O perators’ R. registration and I. dentification. This number represents a European customs identification. They recognize economic operators in the movement of goods and customs clearances can be processed more easily for imports and exports. With the exit from the EU, all British EORI numbers expire and must be reapplied for.

  • EU organic logo and organic emblem:

Both the Europe-wide organic seal and the EU emblem may no longer be used on British (organic) products. But because exceptions prove the rule, an equivalence agreement could be reached between the UK and the EU. This must be based on compliance with the respective food safety standards.

… storage capacity?

What is already noticeable? Many beverage and food manufacturers plan ahead and, like the British supermarket chain Tesco, rely on just-in-time productions. This is a good way to prevent food waste and skyrocketing storage costs. But what’s the catch? If deliveries are delayed or the supply chain is interrupted, the shelves are empty within a very short time. The stocks need to be increased.

The British data analysis company GlobalData records that around 75% of warehouse owners report full utilization of their warehouse space. You are on the Brexit winning side: In 2018, storage costs rose by around 25% due to the high demand.

Automotive, tobacco, alcohol and pharmaceutical companies in particular began to store products early. In the case of expensive and long-lasting items, this is not a problem and is definitely advisable. Frozen foods can also be stored for a long time. But what about fresh goods?

… food prices?

Around 67% of customers fear price increases in the food sector. But only 10% have started buying goods in advance. Many buyers use the so-called Brexit boxes for this. They contain canned macaroni, pasta Bolognese, sweet and sour chicken, beef and potato stew, a water filter and a fire starter. The box is worth around 330 euros.

… financial and bureaucratic effort?

Even if there is an agreement between the UK and the EU and a free trade agreement emerges, the costs will be immense. There is talk of a financial and bureaucratic expense of around 4.4 billion euros.

What then does a no-Brexit deal mean? According to a study by the London School of Economics commissioned by the dairy group Arla, there are significant additional costs. In this case the tariffs rise and the import can decrease drastically. To date, the import of food to the UK from the EU accounts for around 40% of all food imports.

According to British market research, it is possible for companies to relocate their production from the EU to the UK. In doing so, they want to avoid the costs of handling goods at the border. But this is not an option in the short term because it can take several years to build up and expand capacities.

… imports and exports to and from Great Britain?

In the event of a deal, UK imports are likely to decline by around 20%. This results in rising food prices for consumers.

If the respective parties do not agree on future trade relations, imports can even plummet by up to 67%. And only in the medium term.

Arla generates a large part of its sales from the UK. Accordingly, the company is in favor of agreeing a free trade agreement. Because it sees its business endangered by Brexit.

Who is at risk from the possible no-deal Brexit?

According to Will Surman, responsible for public relations and communication at FoodDrinkEurope, the export volume from the EU to the UK could drop significantly. He goes on to say that the result can be a loss of income and the resulting job losses. The consequences are immense, especially for small and medium-sized companies, individual farmers and agricultural cooperatives.

Get safely through Brexit with Ehlert

Even if the consequences seem dire at first, you are on the safe side with Ehlert. in the Ehlert online shop we offer you everything you need for food production from secure supply channels. And not only that: You get everything from a single source and can thus reduce transaction and delivery costs. Please do not hesitate to contact us if you have any questions. We are here for you!