No deal Brexit could make British brands more competitive

Negotiations between the UK and the EU will carry on this week as both sides say they will go “the extra mile” to try to reach a post-Brexit trade agreement. However, Prime Minister Boris Johnson has warned that a no-deal outcome is “most likely”.

A no deal Brexit would raise food prices, with the British Retail Consortium warning that without a deal, customers and supermarkets would be hit with a £3.1 billion tariff bombshell on food and drink.

“Furthermore, retailers will need time to implement the aspects of any deal, and the ongoing uncertainty surrounding the new checks and red tape that will apply from 1st January will create disruption in the supply of many goods,” said Andrew Opie, director of food and sustainability at the BRC.

But Luke Davis, CEO of IW Capital told Speciality Food that while a no deal split could make EU-produced goods more expensive, it could stand to benefit British-made food and drink. “This could therefore lead customers to reconsider their spending and instead purchase such foods sourced here in the UK, rather than those imported at higher prices,” Luke said.

“There has been discussion that for some cheeses imported from Europe, for example, will be subject to tariffs of up to 35%. This will undoubtedly make UK produced alternatives far more competitive in the market,” he added.

Previous research by Lumina Intelligence found that nearly a fifth of consumers plan to buy more British brands after Brexit takes effect on 31st December – something which independent retailers can capitalise on by promoting the provenance and local credentials of their products.

“This is symptomatic of the trend that we expect to see from smaller, UK-based businesses, producers and manufacturers,” Luke explained. “Each problem or crisis will have winners and losers but those that are adaptable and in position to take advantage of the situation could see a big increase in business.”

Will supermarket ‘grace period’ apply to independents?
At the same time, questions remain over a grace period announced by Michael Gove, chancellor of the Duchy of Lancaster, last week, in order to quell fears over disruption to the food and drink trade. Under the plans, supermarkets would be given a three-month grace period from 1st January to phase in new checks and ensure supplies moving between Britain and Northern Ireland aren’t obstructed.

“We know that some supermarkets are already ready. One or two others need time in order to get ready,” he said.

But the Federation of Small Businesses (FSB) has called for clarity on the “vital details” that will determine how the grace period will operate, including whether small businesses would be eligible.

“While we welcome the concept of a ‘grace period’ to allow adjustments, there is a real risk that the can may simply have been kicked down the road, as the Minister referred to a range of adjustment periods from three to twelve months,” said the FSB’s head of external affairs, Roger Pollen.

“He also made reference to these flexibilities in respect of supermarkets but we are not yet clear what, if any, grace periods will apply to smaller food sector businesses and others bringing product in from GB,” he added.

Retail NI also urged the government to provide clarification, with chief executive Glyn Roberts warning that not providing this information could result in a third of the local, independent food and grocery sector being at a “competitive disadvantage to large supermarkets”.

“Thousands of local independent retailers deserve better than this from the UK government.” While the details remain in flux, the group told Speciality Food that it is hopeful that the government is on the right course after its Northern Ireland Protocol included local independent retailers and wholesalers as ‘authorised traders’.

Jenny Rose, manager of the Farm Retail Association, said that farm shops will predominantly be helped by their short, local supply chains, and will not be as effected by Brexit as larger supermarkets. “Some items like pasta may be affected, but local heroes like the Yorkshire Pasta Company are helping to ensure that great pasta is now made in the UK.”

For those in the food and drink sector that trade with Ireland and Northern Ireland, ensuring any hurdles are smoothed over will be critical after Brexit. Recent export data by the Food and Drink Federation showed that Ireland made up almost 30% of overall UK sales in the EU. “Maintaining these highly integrated supply chains across Great Britain, the Republic of Ireland and Northern Ireland as we leave the EU will be essential for future growth in our industry,” the FDF said.