With a vote on the UK’s membership of the EU just months away, much of the talk has been centered on a trio of issues: migration, welfare benefits and EU bureaucracy. The voices of business leaders, on the other hand, have been surprisingly quiet on the subject of a so-called "Brexit." FoodIngredientsFirst spoke to several suppliers and manufacturers to gauge the mood of the industry.
While some UK plcs – such as Diageo, Asda and Greene King – have raised their heads above the parapet and called for the UK to remain part of the EU, others such as retail giants Tesco and Sainsbury’s have remained silent on the subject.
For UK food ingredients companies – and other food and drinks manufacturers – the implications of Brexit could be huge, whether it be the impact on sterling, free movement of goods, or the opportunity to attract workers from across the EU.
Natalie Knight, the chief finance officer of Arla told FoodIngredientsFirst: “The most significant area in which a Brexit would affect our business is the potential impact that it would have on the British Pound. A weaker British currency would affect us negatively.”
A weaker sterling would drive up the cost of raw materials and other fundamentals to the food ingredients sector.
Peter Hill, chief executive of Middleton Foods, which makes mixes and glazes for the fish industry, said: “The big thing that might affect us – but it will affect all my competitors so it won’t be such a big problem – is if we do come out of Europe what happens to sterling? If sterling becomes weaker it is immediately going to put the cost up of raw materials!”
UK-based nutritional ingredient supplier Cambridge Commodities is continuing its entrepreneurial evolution from ingredient supplier to innovation partner. The past 4 years have seen the company’s turnover more than double from £12 million (US$17 million) to £30 million (US$42.5 million). Cambridge Commodities now has around 100 employees and is looking to capitalize on a “back to nature” trend and eye platforms within mainstream nutrition that are focused on balanced and guilt free healthy lifestyles, without sacrificing on taste.
Cambridge Commodities has now installed a team of 8 employees in continental Europe, with associates stationed in Scandinavia, in France, Iberia and soon Germany. Revenues of £6 million were achieved for this part of the business in 2015: 20% of total turnover. “Our plans are that within the next 4 years to be an £80 million company, with a little more than half coming from the European continent,” says Managing Director, James Stevens.
These ambitions could of course be rudely interrupted should the June 24, 2016 referendum result in the UK eventually leaving the EU. But Stevens maintains that even such a trade barrier could be scaled. “If a Brexit were to happen, we will find a way. We are an entrepreneurial company and if someone puts a barrier or a blockade in front our plans, we will manage. However, we are proud that our ingredients are in every widely known sports and health brand in Europe, and our next target is food and retailers on the continent,” he adds.
Like many businesses, European dairy cooperative Arla and Middleton Foods are in limbo, as there is no definitive blueprint as to how the UK would fashion new trading relationships with the EU-and outside of the EU – should Brexit happen.
A potential nightmare scenario is that in light of Brexit, years could be spent trying to renegotiate new trade and treaty agreements, which could mean UK companies losing competitive ground to rivals.
Knight adds: “Mitigation plans are being looked at but it’s difficult to foresee what a Brexit will mean in any detail and a lot would depend on subsequent negotiations between the EU and the UK.”
For the food industry, the argument for remaining is that if the UK wants to play a key role in reviewing EU food legislation, then it is better to be involved in reforming legislation then having no say.
Critics, on the other hand, believe the UK food industry would benefit from Brexit as the government would be able to ditch perceived onerous rules, such as those relating to hygiene and slaughterhouses.
According to figures from the Defra (department for environment, food and rural affairs), of the UK’s food supply, around 54 percent is produced in the UK, the EU accounts for 27 percent while 19 percent comes from the countries outside of the EU.
For a company such as EuriLait, the UK subsidiary of French cooperatives Laita and Eurial, which supplies cheese and dairy products from the EU, the crunch factor will be whether free trade is maintained.
Howard Newmarch, managing director of EuriLait said: “The upside of being part of the union is the free movement of trade and the fact that the UK is a big market and we have an influence over what those companies do, what they produce and the standards to what they operate.”
“There would be a question over how much product we can bring in without there being the imposition of quotas [should Brexit happen].”
However, Newmarch believes there is no appetite for such restrictions, particularly on food.
He adds: “I think we are better off in than out. I don’t see any advantage for us to be outside of the European Union. I think we are better off as part of 28 counties talking together, working together for the common good.”
Matti Rihko, the chief executive of Finish animal fee and cereal maker Raisio, believes there will be limited impact on Raisio.
He said: “Provided Brexit doesn’t mean custom duty on the borders. If the free trade continues not much impact is our estimate.”
The Food and Drinks Federation (FDF) – whose members include subsidiaries of big international food and drinks companies such as Cadbury and PepsiCo, as well as British companies like Thorntons – is expected to make an announcement on its position in the coming days.
It is thought that the vast majority of UK food and drink companies will back staying in the European Union.
Like the FDF, the EU’s food and drink industry association, FoodDrinkEurope (FDE), has yet to publicly comment on the issue.
Another potential issue is on the labor market: the food and drinks sector is a big employer of labor from the EU, in low-skill and higher-skilled roles.
Changes to in-work benefits for EU migrants as part of renegotiations to stay in the UK could curtail the appeal of working in the UK.
Hill points out that around 10 percent of his labor force-equating to between 10 and 15 workers – come from the EU.
He said that compared to UK workers, the EU counterparts are “more efficient and dedicated to their work.”
With so much still in the air, it is difficult to weigh the overall impact of Brexit on the food sector.
But it appears that most believe it is preferable to remain with the status quo, as they are concerned that should the UK exit the EU then they will have to agree to EU food regulations should they want to export to the EU but will have no role to play themselves in how regulation is formed.
