Pathways for food firms to build towards life after Brexit

The immediate impact of sterling weakening will make it difficult for Irish exporters to compete in the short term

We are now getting used to the idea that Britain will leave the European Union, with several potential negative impacts on us and our economy.

There are the immediate effects of a weaker sterling, which reduces the buying power of British companies and British tourists, and increases the competitiveness of British business, which is in competition with us, here, in Britain itself and on export markets, in which we compete against each other.

Lower share prices also reduces the wealth both of ourselves and of our UK customers.

And then there is the uncertainty, which combined with reduced wealth, could lead to reduced levels of economic growth (some even say recession) in the UK, our largest export market. 

This would also lead to reduced levels of economic growth here.

But what can we do about it? The state agencies, which support native business such as Enterprise Ireland and An Bord Bia have already been active in giving advice to firms on what to do to minimise the ill effects (or perhaps in some limited circumstances) to avail of opportunities created.

Bord Bia organised a “breakfast briefing” for firms in the food and drink sector, last week — meeting ended at 10.30am.

Over 180 food company representatives attended. Aidan Cotter, the Bord Bia chief executive, reported on a survey of their clients carried out since the Brexit decision.

Forty percent expected a decline in their business, while 35% did not know at that stage, 22% expected no change.

Six-in-10 businesses were most concerned about the decline in the sterling exchange rate (which of course was real and had already occurred). 

One in three firms would search for new markets, while the other two thirds, would seek either to cut costs or raise their prices.

Some 41% of Irish food and drink exports went to the UK in 2015, while 31% went to other EU markets and 28% to “world” markets. 

The sectors most exposed to the UK market were edible horticulture (mostly mushrooms) 90%, poultry 84%, prepared consumer foods (ready meals, burgers etc) 70%, pigmeat 61%, and beef 52%. Other sectors such as dairying, beverages, sheepmeat and fish were less exposed.

Britain is also a food exporter and Ireland is its number 1 market with imports of £3bn (€3.6bn) of food products by us. Its next largest customers are France, Netherlands and Germany, with British exports in each case of from £1bn to £1.5bn.

Prepared consumer foods (43%), dairy products (15%) and beverages (13%) were the main items in the Irish trade. 

We can obviously expect that the prices of these products, where there is already an established trade, to become more competitive in our home market, with the decline in sterling.

Grocery expert

A second speaker, James Walton, was from Institute of Grocery Development, a UK based training body for the grocery trade. He outlined the myriad ways in which EU laws or regulations affected the grocery trade including 

(a) regulation of competition and of state aid; 

(b) management of greenhouse gas emissions, of water and of waste; 

(c) regulation of food market including nutrition labelling, product standards; 

(d) free movement of labour, human rights, working conditions; 

(e) the common agricultural and fisheries policies; and 

(f) trade — with common customs tariffs and free trade within the union.

Each of these areas will be affected in Britain, to a greater or lesser degree, when Brexit is a reality. Mr Walton then outlined the kind of scenarios that would be good for UK companies and for UK farmers.

In relation to farming, there would be negative consequences if EU farming subsidies were not fully replaced, the range of goods produced would contract and farmers may be forced to concentrate on production at the expense of sustainability. (Some opportunities there for Irish farming, perhaps — but in the longer term).

In relation to trade, the following scenarios would be generally favourable for UK companies: The UK joins the European Economic Area (which includes Norway and Iceland) and continues to trade freely with the EU in most areas.

The EU agrees to add food and drink to the list of tariff-free items in the EEA. However, the price of access is that the UK must comply with EU rules and make financial contributions. Other major countries agree to trade with the UK on EU terms.


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