BREXIT: The latest…
Where are we now? What does the Free Trade Agreement mean for your food supply? And what can you be doing now?
Our Procurement Director, Mike Meek, has been providing commentary and analysis on Brexit and the impact of possible outcomes for the past few years and is also on the University of Warwick advisory committee to the Government regarding food supply. Now a Free Trade Agreement has been struck with the EU, Mike looks at what this will likely mean for food supply chains
Firstly, let’s look at some key headlines and where we are as of January 2021:
- 31 December 2020: the EU and UK reached a post Brexit agreement, officially called the Trade and Cooperation Agreement (TCA)
- The rules of the EU’s Single Market and Customs Union no longer apply to the UK except for Northern Ireland
- UK and EU continue to have 100% tariff liberalisation, meaning no tariffs or quotas between UK and EU where goods meet relevant rules of origin. The Rules of Origin chapter ensures that only ‘originating’ goods benefit from tariff free liberalised market access. This brings potential tariffs when importing or exporting goods that have been manufactured in the UK or EU but have multiple ingredients which may include some imported from elsewhere
- In most respects the UK will trade with the EU on the same terms as any other non-member country
- This means new border controls for people, goods and animals and new documentation and certification
- Food and Drink Federation (FDF) believes that red tape and border checks will add £3bn to food importers costs or around 8%
“Any suggestions that these costs will not lead to an increase in food prices should be taken with a really hefty pinch of salt”
Dominic Gouldie, Head of International Trade, FDF
- Northern Ireland forced to localise supply chains to avoid new customs obligations under the NI protocol
- Supermarkets in NI forced to remove hundreds of product lines to avoid gap shelves and some retailers reported to have suspended deliveries to NI
- Not all EU third country trade deals rolled over to the UK leading to tariff impacts on some items such as tuna, cocoa, and bananas
- Road Haulage Association report that 20% of vehicles are being delayed due to incorrect paperwork
- Incorrect paperwork has a significant impact on mixed loads, where hauliers are moving goods for multiple customers on one vehicle (Groupage). All items must have the correct paperwork and any errors stop or delay the whole load
- The costs of freight transport have increased with spot rates for cross channel haulage reaching 6 Euro/KM for a full truckload compared to usual price of 1.50 Euro to 3 Euro KM
- Border disruption and red tape has a disproportionate impact upon short shelf-life goods and industries, such as fresh produce and fish
- The TCA provides a framework for future fishing and the UK has departed from the Common Fisheries Policy
- UK fishers will have an uplift in quota to 25% of the value of EU catch in UK waters phased over 5 years, at which point mutual access will be negotiated
- 2021: Negotiations continue.
So what does this mean?
Mike says “It is a positive outcome for producers and consumers alike that a Free Trade Agreement has been struck with the EU prior to the end of the Transition Period. A no-deal scenario has been averted and tariffs and quotas will not be enacted. However, the frictionless cross border trade with the EU, that the UK was used to, is no more. There are significant changes for imports and exports, and this may bring challenge and disruption.
For Agrifood and food & drink, these changes include phytosanitary controls and labelling amongst others, but a key challenge to the interconnected supply chain are the ‘rules of origin’ clauses. These in essence mean that for the EU to use the UK as a hub, as it does currently, tariffs would have to be applied on importing back into the EU. This will therefore have a significant impact on the current food supply chain network.
There has been a lull of volume at the Dover-Calais crossing since the deal was agreed, circa 50% of normal January volumes. It is expected to increase over the coming weeks – time will tell on the success of our new relationship with the EU.”
In the meantime, there are 4 key things foodservice and catering operations should consider:
- Stocking up – increasing stock levels of ambient and frozen products may alleviate any initial challenges on fresh produce from the EU. Using frozen veg and tinned fruit may need to be an option.
- Using a higher proportion of UK product – this should reduce the chance of border disruption. However, do be aware that constituent ingredients used in UK food manufacture may be impacted.
- Being flexible around your offering – be prepared to order own-label instead of branded goods where availability issues or cost increases occur. There may be a need to be flexible on the quality of fresh produce. You can also increase your order lead time. For example, it is not recommended to order day 1 for delivery on day 2 for use on day 2. Operational flexibility is key. Supply disruption may cause increased product substitutions, so it is imperative that your Allergen Management processes and best practice and followed.
- Communicating – ensure that you are regularly talking to your suppliers and advising your consumers and wider stakeholders to ensure that supply challenges are understood. With the added level of disruption and change in delivery days and routes due to Covid-19 and the Jan-Feb lockdown, this need for communication is even more vital.