The reality of how Food and Beverage Supply chains shape up 10 months after Brexit

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We are about to face an extremely difficult winter, not only through fear of increasing Covid cases and inflation, but the impact of post-Brexit chaos, affecting consumers and their ability to pick up holiday favourites in time for a much-needed Christmas.   

The UK is not a self-sufficient economy when it comes to food. One estimate suggests that the country would have ‘run out of food’ if consumers ate British food alone. Research from City University’s Centre for Food Policy shows that Britain now imports 93% of its fruit and 47% of vegetables; with a substantial amount of meat consumption also relying on imports.  

Our reliance on the EU is (or was) significant, with the British Retail Consortium reporting around 30% of UK imports from the EU (Dec 2020). We are already seeing a decline, which is likely to catalyse in the upcoming months ahead of 2022, when full checks are implemented at UK borders. 

 

Changing trade dynamics

 

The UK Food & Drink Federation (FDF) revealed earlier this year that UK Exports were 75% down in the first month of the post-Brexit trade. According to a comprehensive analysis of trade during the first six months of 2021 by the FDF shared exclusively with PoliticsHome, food and drink exports to the EU were 15.9% down on the same period last year, and down by over a quarter — 27.4% — compared to the first half of 2019. Meat and dairy products have been the worst hit, the FDF analysis found, due largely to stringent post-Brexit rules for British businesses selling goods of animal origin to customers. 

Exports of beef to the continent were 24.1% down in the first half of 2021 compared with the same period last year, and down by 37.1% on the first six months of 2019. Cheese exports were 26.1% down on the same period last year, and over a third – 34.2% – down on the first half of 2019. The pandemic is also believed to have had some impact on UK exports, as the locking down of hospitality businesses across Europe has also reduced demand for British products.  

The industry does not believe that the pandemic alone can account for the significant shortfalls. Covid ”doesn’t make up for the disastrous loss of £2bn in sales to the EU,” warned the FDF’s Head of International Trade, Dominic Goudie. John Whitehead of the Food & Drink Exporters Association said there was “growing evidence” that the red tape which now faces exporters to the EU has led some businesses to move operations to the continent and forced European customers to look elsewhere for products. The Department for Environment, Food and Rural Affairs (Defra) insisted the immediate impact of the pandemic on global trade meant it was “still too early to draw any firm conclusions” about the impact of the Boris Johnson’s post-Brexit trade deal. 

While a lot of this can be attributed to the pandemic, it cannot be disagreed that Brexit played an important part in this decline. The FDF said the loss in sales was mostly affecting smaller businesses, often run by families, who are finding it more difficult than big companies to deal with post-Brexit paperwork. 

Large scale change in business models do tend to have a strong impact on the revenues and process effectiveness, many times worsening the situation as a part of the teething effects, to then recover back and improve through to the intended outcomes of the change itself.  

There is no doubt that the F&B business will find a way back through optimisation and change management programmes in due course; however, the short- and medium-term impact of Brexit cannot be looked away from. 

 

In essence, there are five key impacts Brexit has had on Food & Beverage industry:

 

  • Requirement for labelling, rules of origin and geographical indication 
  • Changes to food safety and standards 
  • Transport & border checks  
  • ISPM-15 certification for pallets 
  • Labour shortages, raw material, and additional paperwork across the above 

 

Despite these challenges, it’s important to highlight the positive impact Brexit has had on the food and beverage industry, with particular emphasis on access to new markets. Trade has significantly grown with China and Canada, and in the last month, the UK signed a historic trade deal with New Zealand. We are yet to see further benefits to this industry in a post-Brexit world due to the impact of the pandemic and global supply chain issues, however there is huge potential on the horizon.  

To further prepare your organisation for the challenges associated with Brexit, it is important to ensure you understand the end-to-end impact Brexit has on your organisation, whilst understanding your own supply chain. To prepare yourself as more regulation comes into practice, identifying the gaps and associated actions is fundamental. The key reasons why organisations are ill prepared for Brexit is due to lack of visibility of their supply chains.  

Please contact Mark Boswell, Head of Food & Beverage Practice at 4C Associates at mark.boswell@4cassociates.com or Gopal Iyer, Head of Supply Chain Practice at 4C Associates at gopal.iyer@4cassociates.com  if you would like to understand more about the use of technology to improve your supply chains resilience. 

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