As widely predicted, UK Prime Minister Theresa May’s Withdrawal Agreement, setting out an orderly exit from the EU, was yesterday massively voted down by MPs in a historic defeat that now sees May facing a further vote of no confidence. The deal was rejected by 432 votes to 202, throwing the future of Brexit into further chaos. Last night’s result leaves the food industry facing even more uncertainty and fuels growing concerns that the UK is heading for a “catastrophic” no-deal scenario.
The chasms between ministers on this issue proved insurmountable yesterday (Jan 15) and as a result, the food industry, which is extremely susceptible to the trading challenges which a “no-deal” presents, is reacting to the latest twist in the long-running and polarizing Brexit process.
As March 29 – the date the UK is set to leave the EU – draws nearer, the overriding message coming from the key organizations representing Britain’s biggest sectors in the food industry is that a Hard Brexit would be devastating for a multitude of sectors. Representatives from the likes of the Food and Drink Federation (FDF), EU agricultural group Copa Cogeca and FoodDrinkEurope all fear the dramatic economic consequences of a “no-deal” Brexit for EU and UK farmers, food and drink producers, traders in agri-food commodities, as well as consumers.
“The European agri-food chain would like to reiterate that a ‘no-deal’ Brexit would be hugely damaging for both the UK and EU agri-food sector and must be avoided at all costs,” says a joint statement from FoodDrinkEurope and European Liaison Committee for Agricultural and Agri-Food Trade (CELCAA).
Helen Dickinson, Chief Executive of the British Retail Consortium (BRC), adds: “The events in Westminster are cause for serious concern. A ‘no-deal’ Brexit means the public will face higher prices and less choice on the shelves. British businesses desperately need certainty about the UK’s future trading relationship with the EU and will be severely disadvantaged by a no-deal.”
“This really is crunch time and politicians must come together around a workable solution that safeguards consumers from the costs and disruptions of new constraints on the tariff-free and frictionless trade we currently enjoy with partners in the EU. The time for Parliamentary games is over.”
National Farmers’ Union of England and Wales (NFU) President Minette Batters also says the UK now finds itself in a situation where a “no-deal” Brexit appears to be increasingly likely.
“I have been clear that such an exit would simply be catastrophic for the UK and its food and farming sector and the country’s ability to produce home-grown food,” she says. “A ‘no-deal’ Brexit could lead to huge disruption as a result of an effective trade embargo on the export of animals and animal products to the EU leaving many livestock farmers with no market for their produce. At the same time, we know that the Government would choose to unilaterally lower import tariffs on food.”
“Let’s be clear about that, if that happened Britain would be actively encouraging food imports from all over the world potentially produced to food standards lower than is legally allowed by UK farmers. This would leave our own farmers facing the devastating outcome of having limited markets for their own produce while at the same time being undercut by low standard imports.”
Such a move would leave Britain with a weakened ability to produce its own food, notes Batters, who stresses that a “no-deal” Brexit has to be avoided at all costs.
FDF Chief Executive, Ian Wright, has also weighed in.
“The Prime Minister’s deal has been decisively rejected and it is now vital that the political leadership find a way to indicate what alternative should be pursued. We are calling for an extension to Article 50 in order for parliament to decide what our next steps are; whether that is a new deal, a referendum, an orderly exit from the EU without a deal at a later date, or a general election,” he says.
“The Government should now be looking to speak with representative organizations such as the FDF, to ensure they are pursuing an alternative that prevents further damage to the UK’s wider economy.”
The potential impact of a no deal Brexit is particularly devastating for the food industry. In September 2018, Barclays warned that failing to reach a Brexit deal could end up costing £9.3 billion (US$12.2 billion) a year as food retailers and their supply chain face a mass of additional tariffs as a result of the UK not negotiating a trading deal with the EU. The report forecasts widespread disruption and price hikes with the “hard” Brexit model forecast to create an average tariff of 27 percent for food and drink supply chains, which is significantly more than the 3-4 percent levy that would hit non-food products.
Brexit-related stockpiling is driving up the cost of short-term space in UK warehouses too, as manufacturers in all sectors begin to hoard raw materials. It is also recently reported that a “hard” Brexit would have devastating ramifications for the European sugar industry with tariffs of over 100 percent entering into force if no deal is signed, according to Guillaume Planque, Head of Product Management – Sugar & Sweetening Solutions at French-headquartered sugar giant Tereos.
There are other potential scenarios on the cards and much depends on the result of today’s vote of no confidence in May, a motion put forward by Labour. A vote of no confidence would allow MPs to decide on whether they want the government to continue, but if a majority back the vote, following 14-days, a general election (usually only held up to every five years in the UK) can be held.
Speculation still mounts as to whether there could be another referendum, whether EU officials will re-negotiate the deal with May or if Brexit is called off altogether. The next steps remain unclear.
