AHDB Conference speakers say Britain leaving the E.U. will have long-term consequences.
David Swales, head of strategic insight at AHDB, discussed the effects of the U.K. vote to leave the E.U., although he explained that nothing has actually happened yet.
“It is likely that the U.K. will remain a member of the E.U. for at least a couple of years,” he said. “Tariff-free access to the E.U. market is a critical issue for the U.K. cereals and oilseeds sector.”
He looked at the potential effect of Brexit on international trade.
“The pound dropped dramatically on June 24,” he said. “It’s obviously helped our export competitiveness. This could be very much a short-term factor. There are trade-offs between the regulatory autonomy we will have and the costs of doing trade. Much of the rhetoric seems to suggest we are not going to remain in the single market and we will be seeking some sort of free trade agreement.
“That will enable the E.U. to set its own rules and regulations. Over time you would expect E.U. and U.K. regulations to diverge. That will increase our costs of doing trade.”
There are around £18 billion of food and drink exports each year from the U.K., and two-thirds of its export grain goes to the E.U., he said.
“Tariff-free access as well as access is incredibly important,” Swales said. “Over 80% of wheat and barley exports go to the E.U.”
In the oilseeds sector, U.K. exports last year all went to the E.U.
“We are a very big importer of soybeans from South America,” he said. “There are lots of question marks over what regulations the U.K. will put in place.”
He said E.U. tariffs will effectively keep cheap grain out of the E.U.
“There is a real threat here that the U.K. would be exposed to these tariffs,” he explained. “We will be out there competing with the Russians. That will create downward pressure on prices.”
Brexit could force the U.K. to look further afield, leading to a potential rapid expansion of the global middle class, he said. The fastest growth was in the Asia/Pacific region.
“The E.U. has set up a number of free trade agreements,” he said. “There is debate around whether the U.K. will inherit a share of these agreements. Probably we won’t. This is going to be a really key government priority. Arguably, what is more important is the myriad of technical agreements. The U.K. is likely to adopt a very liberal approach to trade. The key question for the U.K. is where does the food and agriculture sector fit within the hierarchy of priorities?”
There are some countries that have higher support for farmers than the E.U. level.
“It is highly unlikely that the U.K. will head in that direction,” he said. “Keeping food prices down is likely to be a higher priority. It is important that we recognize the importance of those support payments. They have a refuge source of resilience of the industry.”
He expected the focus of support to change.
“I think they will be more outcome focused,” he said, suggesting that agricultural environment schemes or schemes to make farms more competitive might be introduced.
“There are some out there who feel that there will be a rising patriotism and consumers will pay a bit more for British food,” he said. “They potentially have a bit more money to spend. Whether we can count on that continuing is difficult to say.”
He referred to a study by the Institute of Grocery Distribution in which consumers criteria for buying food were listed in order of importance.
“Price nearly always gets the first mention,” he said. “I don’t think we can rely on consumers to spend more just because products are British. We are going to have to focus on being more price competitive.”
