How Brexit will impact the food sector in 2022

Brexit might seem like old news for the general public, but for retailers and food producers who rely on exporting or importing products to and from the Continent, the UK’s exit from the European Union is still a daily concern.

Some aspects of the Brexit deal which have critical impacts on the food and drink sector are still in debate, like the Northern Ireland Protocol, while others have only just been introduced after months of delay, like new trade regulations for imports from the EU, which were brought in on 1st January.

New import rules hit speciality retailers

The Federation of Small Businesses (FSB) has warned that SMEs like local delicatessen will be hit hard by the new import checks. “The classic example is your high street deli that is importing delicacies like, say, chorizo from Spain or Parmesan from Italy,” James Sibley, the FSB’s head of international affairs, told The Guardian. “For them, the thought of having to register for these systems is daunting and the process is expensive, so we’ve a lot of concern there. For those small businesses directly affected, we have picked up a lot of worry.”

The Cold Chain Federation similarly warned that speciality food imports could face the same 70% decline that hit exports of food by small businesses after Brexit. “The big casualty of these trade barriers is the business that needs to import small and frequent quantities across borders – a pallet load of speciality cheeses or boxes of onion powder. This is the sort of trade that is going to suffer,” said Shane Brennan, CEO.

Alex Marsh, CEO of Tweakd, a pre-prepared meal and juice brand, told Speciality Food that the new regulations have made importing speciality products, like cooked meat and fish, from France “much, much harder”. He said the “badly thought out, last-minute bureaucratic madness” and the “incredibly convoluted British import system” caused import times to increase from about three days to five weeks, as well as adding costs. 

“It’s completely ludicrous, incredibly frustrating, and will lead to increased delivery lead times, added (and unnecessary) costs, and I suspect numerous suppliers and customers will simply give up and stop bothering. Others will do what some of my suppliers have done and add significant margins onto their costs of products for the UK,” Alex said. “They don’t want to, but we have now become much more expensive to do business with. That’s not a great outcome, and as a British business owner it gives me a massive headache.”

The effects of the new rules are wide-ranging, as Jason Bull, managing director at Eurostar Commodities, explained, “The additional paperwork required after the 1st January 2022 is adding cost and complexity to the entire food chain – all products.”

UK-made products have Brexit opportunity

Brexit has spelled good news for some, however. With imports of European products facing higher costs, their British-made counterparts may see an uplift in sales. “For us generally, Brexit has been a positive thing,” says Nick Sinclair, co-founder of artisan butter company The Edinburgh Butter Company. “Our main competition is French imports, so anything that makes it more difficult or more expensive for those imports to land in the UK obviously helps us from a price competitive perspective, as well as a security of supply position of our customers.”

Brexit is responsible for accelerating the local shopping trend, Nick said. “Obviously, there was already an established trend within the UK to try and source more locally before Brexit happened, but my feeling is that Brexit increased the pace of that change. Whether because of increased awareness of local produce or issues including security of supply of imports, whatever the case we have seen it becoming more and more of a factor in people’s buying decisions. As a business, we are proud to already use local suppliers for making our butter, so for us it’s only a good thing that it’s filtering into the consumer market too.”

EU exports in freefall

Despite the positive effect Brexit has had on his business, Nick says the EU exit could negatively impact longer-term prospects. “As we grow and start to look at potential export markets, Brexit issues could prove a barrier to growth.”

Exports to the EU have plummeted over the past year. The Food and Drink Federation (FDF) reported that UK exports of food and drink to the EU were down £2.4bn, or nearly 24%, in the first three-quarters of 2021 compared to pre-pandemic levels, thanks to the combined impacts of Brexit and Covid. 

Once again, smaller businesses often pay the price. “It is extremely disappointing to see how badly our trade with the EU has been affected, with our smallest exporters hardest hit,” said Dominic Goudie, head of international trade at the FDF. “It is essential that the Government works constructively with the EU to improve the implementation of the Trade and Cooperation Agreement to ensure that it works for small businesses, otherwise this downturn will be here to stay.”

Brexit’s impact on the labour market

In addition to affecting the way food and drink products are imported and exported, Brexit has also changed trends in the movement of people into the UK. “Within the hospitality industry, the supply chain crisis is not highlighting the shortage of products, but instead the availability of labour and the impact that this has on suppliers and businesses,” said Andy Milner, procurement and supply chain director at WSH, a hospitality business whose brands include independent food service provider BaxterStorey.

“This has been an unfortunate result of both Brexit and the pandemic, with many of those in hospitality leaving the sector as well as the wider supply chain, whether it be HGV drivers, pickers or manufacturing and processing resource,” Andy said. “It’s still not easy to delineate Brexit from Covid-19 when it comes to supply chain issues, and we are likely to see further challenges to availability and pricing as the UK Border Operating Model evolves over the next 12 months.”

For 2022, with the matter of Brexit still far from settled, independents will continue to sail on uncertain seas.