The Brexit saga continues, and there has now been a further stark warning from the British food and drink lobby, most recently.
They have stated that Britain will experience shortages of a number of different fresh produce items for a number of weeks, perhaps even months. This is directly linked to the concept that a no-deal Brexit will result in products rotting away in lorries that are stuck sitting at ports.
Tim Rycroft, who is the Food and Drink Federation’s Chief Operating Officer, also added: “We’re not going to starve, but there will be shortages of fresh food and some specialist ingredients. It’s going to be a little bit unpredictable.” He then claimed, “Given that food very often is perishable and has a short shelf life, we expect that there will be some selective shortages of food in the weeks and months following no-deal Brexit”. This provides further evidence of continued uncertainty, and exactly how negative a no-deal Brexit could be to the industry.
The fear of a no-deal Brexit is also resulting in value dropping on stocks across a number of related markets, as it continues to impact the potential growth of businesses, due to the uncertainty of the situation. Trading volume seems to be more weighted towards a sell, with the GBP/EUR and GBP/USD losing pips since Britain voted to leave the EU. Traders are looking to cash in on this uncertainty, with many watching current events and analysing how they might affect prices both in the long and short term – a common practice for people trading on currency. One trader we spoke with last week, claimed that uncertainty was so prevalent, that he was looking to hedge his risk to a greater degree than would normally be the case.
The news on potential food shortages came from leaked papers to the Guardian, which showed the governments ‘reasonable worst-case scenarios’ (RWCS) view on the situation. This included risk to medicine supplies and the overall disruption to food chains – an issue that could cost the farming industry up to £850m a year in lost profits.
These warnings are now being backed up by retailers such as Tesco (TSCO.L). They stated that leaving the European Union at the end of October without a transition deal would be very problematic. This is because fresh produce is imported and many warehouses are stocked full prior to Christmas.
Tim Rycroft further added that “Britain imports around 60% of its food by the beginning of November. Just the time that delays caused by a no-deal Brexit could be clogging up ports and motorways”. This is clarification on the claim made by retailers, which is worrying for businesses at present. Winter is also a period in which the United Kingdom becomes more and more dependent on imported products, which further contributes to the potential disruption.
This industry employs 450,000 people in the United Kingdom, which is a stark reminder of the damaging impact this could have. Brexit is now being viewed as the biggest challenge since the second World War, and far surpassing previous domestic crises, such as the 2013 horse meat scandal and the mad cow disease outbreaks in both the 1980s and 1990s respectively.
The original Brexit deadline of 29th March also led to retailers and supermarkets making early changes in order to tackle any potential issues. They spent millions preparing, by working with suppliers to increase stocks of dried goods such as pasta and even toilet paper. The continued delay is only adding to the pressure and further costs for these retailers.
However, three years down the line from the initial Brexit discussion and it appears we are all still unclear on what terms the UK will leave the European Union on later this year. Newly appointed Prime Minister Boris Johnson also now also repeatedly warned the EU that unless a fresh divorce deal is agreed, then he will lead the UK out without a deal on October 31st.
The British Minister responsible for no-deal preparations is Michael Gove and he gave a much more positive outlook on the subject. He said he was confident that a resilient food supply system across the UK would ensure people would have a wide range of choices, whatever happened. However, he did add that “If we do leave without a deal on October 31st there will inevitably be bumps in the road”. Ultimately this shows that no one knows exactly how a no-deal Brexit could impact the UK, so it will continue to be uncertain times until a potential deal is made in the lead up to the end of October.
