Will Brexit Lead to Food Shortages in the New Year?
Over the past few years, much has been written about the potential negative impact of Brexit, much of which was disregarded as 'project fear'. Unfortunately, at least in some areas, it appears that there is some basis to the concerns raised, especially when it comes to food. In mid-October 2020, Tesco's chairman John Allan was quoted in 'the Grocer' as having told Bloomberg, "We can't rule out the possibility that if there is dislocation at the ports of entry to the UK, there will be some shortages of some items of fresh food, at least for a time". He also said there was no need to stockpile, but that "there may be some things we have to learn to do without for a few weeks, possibly a few months after Brexit". So can we expect some food-related disruption in the new year, or will planning and preparation by government and industry mean this is unlikely?
Is A Brexit Deal On The Horizon And Is It Important For Our Food Supply?
The problem with writing anything about Brexit is that you find yourself trying to second-guess what is going to happen, and then being sorely wrong. There have been numerous signs of real progress on a trade deal which have quickly proven to be incorrect. The latest news is that we can expect a Brexit deal this week (week commencing 23/11/2020), but then as the EU's chief negotiator, Michel Barnier has said, "fundamental divergences still remain". Talks have recently been impacted too by members of the EU's negotiating team contracting COVID, meaning a switch to online negotiations.
There are two main impacts of Brexit on the food supply. One is the impact on the ease by which food can flow, and the other is the price. It is now likely that there will be border problems whether there is a deal or not. In part, this is due to new customs paperwork and other red tape which will be required when the UK is no longer part of the customs union. It is also now expected that stockpiling for Brexit and COVID will mean a lack of warehouse space and hence less physical stock of food items within the UK. As the Grocer confirms, "Food businesses built up stocks ahead of previous no-deal Brexit deadlines last year in order to manage the worst of the short-term disruptions, but warehouse space is now running out across the country as businesses build stock ahead of Christmas and a coronavirus second wave. Tesco and other supermarkets were working hard to build the "maximum possible inventory," said Allan, though "this Brexit is happening at the worst possible time of course for the food industry".
While border problems may happen if we get a deal or not (after all, we are leaving the customs union either way), we don't yet know if a short-term extension to the transition period will be negotiated, perhaps using the logic that the country needs to preserve the flow of goods including COVID vaccines. Businesses in Northern Ireland have been at the forefront of pushing for such an extension because the people, systems, and infrastructure will not be in place for mandatory border checks on their borders with the UK.
According to Andrew Opie, director of food at the British Retail Consortium, "the empty shelves and shortages seen in March were mild compared to what could happen later this year if government negotiators cannot secure a deal with the EU in time".
Will Food Prices Rise In The Event Of A No-Deal Brexit?
The other impact of Brexit on food, that of price, will likely be felt more in the event of no-deal. What is needed is a deal with both zero tariffs and zero quotas. According to the British Retail Consortium, food imports from the EU represent 30% of produce in our supermarkets, and these could face an average tariff of 20% without a deal. Overall, this would add £3.1bn to the cost of importing food and drink, which ultimately will be passed onto the consumer. In per family terms, this is about £112 per year. Ian Wright, the CEO of the Food and Drink Federation (FDF) expressed his deep frustration, stating, "The perils of a no-deal exit for GB food and drink manufacturing remain as real as ever. In the event of a no-deal Brexit, shoppers will, literally, pay a heavy price. Imported food and drink from the EU will face eye-watering tariffs averaging 18%, kick-starting price rises. At the same time, border delays and disruption will bring further costs which will not be subsumed by industry. A no-deal outcome is bad for food and drink businesses, bad for food security, and bad for every household in Great Britain". Not all foods would rise by the same amount in the event of no-deal; cheddar cheese will see a price increase of 57%, mince would be 46% more expensive, but salad items may only be 10 – 20% more expensive. It is not just tariffs which will have an impact. The cost of physical checks and paperwork at the border will also add to prices.
As tends to be the case with such stories, the actual outcome often falls between the two extremes. It is likely that having a deal will not fully mitigate the potential for food supply problems in January, and we are being warned to expect some level of disruption. There is no suggestion as yet that the supermarket shelves will be bare, but some items will inevitably see limited supply. We can also expect to see an increase in prices, if not due to the imposition of tariffs then due to the cost of more border checks and paperwork. Hopefully, the government will be able to act quickly in the new year to bring any problems back under control, and work to ensure that our supply chains return to as normal as possible.
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