UK Food & Drink exports at record levels – but what happens post Brexit?

Featuring David Armstrong, Nick Farrant | 12th April, 2018

The latest annual food & drink export statistics make very interesting reading. According to the Food & Drink Exporters Association figures, UK food & drink exports grew by some 9.7% in 2017 compared to 2016, hitting a record level of £22.1bn. Exports to EU and non EU markets both increased, although exports to fellow EU countries remained the largest element at some £13.3bn or 60.2% of total exports.

2017 Export figures – good news

According to the Food & Drink Federation (FDF) the increase is due to a combination of the fall in the value of sterling, following the Brexit vote and the collective efforts of industry and government to promote UK food & drink overseas with, for example, the UK Food and Drink International Action Plan 2016 – 2020.

This last comment is interesting when read in conjunction with the finding in the Lloyds Bank 2017 Food & Drink Report that more than 33% of the firms surveyed called on government to ‘provide incentives to encourage growth.’  Perhaps further work by the government is needed in this area?

Looking at the export figures in detail:

  • As in previous years Ireland remains the largest export market at some £3.7bn. France and the USA are jostling for second place with both markets generating exports of some £2.3bn
  • Most of the larger markets showed a growth in exports – other than Spain which suffered a slight fall although it still remains as the sixth largest market with exports approaching £1bn
  • China continued to show impressive double digit growth with some £570m of UK food and drink purchased by Chinese consumers, so it is now our eighth largest export market
  • Whisky exports remain by far the largest product category at some £4.5bn or some 20% of total exports. Salmon ‘leapfrogged’ both chocolate and beer into second place with a staggering 25.7% increase in exports to £730m
  • More relevant to the SW economy, cheese exports showed an impressive increase in value of 24.7% to £622.9m although this represents only a six percent increase in volume – indicating a continuing drive to export higher quality goods
  • The UK wine industry contained to flourish with exports increasing by 23% to £575m

More detail can be found in the Food & Drinks Exports Snapshot 2017, as linked here.

Trade agreements crucial to continued success

However, it is not all good news. As the FDF states, any failure to secure continued access to the EU’s many preferential trade deals could have ‘serious implications for the food and drink industry’. The UK has some £2.3bn worth of food & drink exports to around 60 countries with which the EU has secured preferential trade agreements.  This represents more than ten percent of total food and drink exports.

According to the FDF, any loss of preferential access to these markets during or after the transition period would have damaging impacts on our export competitiveness.  It would also threaten our ability to import ingredients and raw materials that complement our use of UK produce to deliver affordability, availability, and choice of food for UK consumers.  Without this access to imported ingredients, domestic production and our food & drink export success story would be at risk.

We are aware that the Department of International Trade (DIT) is in current negotiations with the major countries looking to secure similar trade agreement post Brexit. Given that the UK leaving is a major change to the agreements, it is also believed that upon our exit some of the current agreements will cease. Thus this risk is likely to decrease as negotiations progress.

What should food & drink businesses be doing right now to mitigate some of these potential risks to export?

Whilst the very welcome transition period post-Brexit will happen, it is important that this is not used as a reason to delay action – even if a full free trade deal is negotiated, these are still some of the areas that you should consider:

  • Review your supply chain – could it be shortened or simplified?
  • Consider the need to establish overseas offices, warehousing and subsidiaries
  • Look at managing exchange rate risk
  • Could you enter into longer term contractual arrangements for your major purchases?
  • Mitigate the risk to your labour force by investing in R&D and / or automation
  • Review your import / export processing and reporting requirements
  • Could Inward Processing Relief (IPR) help?
  • Transport, storage and ports – do you need Authorised Economic Operator Status?
  • Dairy, eggs, cereals, meat, fruit & vegetables, remain net imports to the UK (*Source: DEFRA – Agriculture in the UK 2016 report). Is there scope to increase UK market-share by targeting domestic as well as non-UK markets?
  • To export food, live animals and animal products outside the EU you usually need an Export Health Certificate (EHC). These may be needed for EU supplies going forwards

For those food & drink companies seeking to increase their exports, details of the help and support available can be found on this link on the FDF website, or by contacting your usual PKF Francis Clark contact.

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