Food and drink
The food and drink sector has grown steadily over the past few years, but will the uncertainty around Brexit challenge its resilience?
The possible imposition of tariffs if the UK leaves the Customs Union – as well as other non-tariff barriers – could impact the export competitiveness of business and raise input costs. There will be supply-side issues facing the sector, which could impact export demand, alongside the risk of currency fluctuations.
Statistically Brexit is a big deal for the sector.
- 60% of trade in food and non-alcoholic drinks is with the EU
- In 2017, EU exports accounted for 61% of total exports
- 70% of F&D imports are sourced from the EU
More than 95% of regulation is in the form of EU legislation, and leaving the EU could create opportunities where current regulations are onerous or restrictive. But if businesses fail to recognise different regulatory systems there could be risks not only to competitiveness, but also public health and consumer confidence.
Similarly, with 120,000 non-UK EU workers in the sector, continued access to labour – and making the UK attractive to labour – will be crucial for many businesses.
Andrew Williams, Head of Food and Drink, says,
2017 saw a record year for UK Food and Drink exports, with many businesses capitalising on the favourable export conditions due to sterling depreciation since the Referendum and increasing demand for high quality UK products. On the flip side, the currency value has contributed to increased costs of ingredients and raw materials, which has impacted margins or seen necessary cost transfers. The sector’s resilience and determination however, has seen exports continue to hit record figures – total F&D exports were £10.68bn for the first half of 2018, up 5.1% on 2017, led by growth in EU trade. Food and Drink businesses should be building on this experience to include exports as a part of their long-term growth strategy.
Uncertainty surrounding the Brexit negotiations has impacted some firms’ investment decisions. Despite this, 51.5% of businesses tell us that they are either increasing investment due to Brexit opportunities or that Brexit has had no impact on their investment plans.
Food and drink exports reached record levels in 2017, with £22bn of exports to 217 markets. While cultural similarities in the EU offer advantages, we are seeing strong demand from further afield than the EU including India and the Middle East.
Sources: Santander Trade Barometer Winter 2018 update - Food and Drink Federation, UK food and drink export statistics 2017