The UK’s Brexit referendum is getting closer and discussions are heating up. But what would Brexit mean for food manufacturers?
Food safety and food labelling
The European Union enforced important food regulations in their member states. If the UK were to exit the EU, what are the consequences in terms of regulations? These regulations may cease to apply but they would remain in place for the time being.
EU food regulations demand high safety standards and dictate labelling information on food packaging. If the UK leaves the EU, the government would have to decide whether the UK needs their own regulations to replace the EU’s. Some see this as a chance to get rid of costly, overburdening regulations. Brexit supporters believe new regulations provide a chance of simplifying production processes and food information regulations, while maintaining a reasonable standard of food safety.
Yet, others think this would be a huge step back in protecting food as well as consumers. Since the UK has been a leading voice in most of the EU food regulations, a Brexit would most likely not lead to significant changes. Although replacement legislations would probably not be exactly the same, it is likely they will stick to a majority of the terms.
What are the implications for food manufacturers in terms of regulations?
A change in regulation is a change, however small it may be. And even small changes can cost manufacturers large sums. They might need to adjust production processes or product packaging in order to meet the new regulations. Yet, if they are also exporting to EU countries, they would still be required to meet the EU food regulations as well. So, there may not be one solution for all markets; we would have to see what the future holds if the UK leaves the EU.
The UK’s export and import with EU countries
The UK largely depends on imports in terms of food. The UK only produces about 60% of the food consumed in the UK. More than a quarter of our supply comes from other EU countries with nearly 40% of fruits and vegetables being imported from European neighbours. UK manufacturers mostly export meat, drink and cereals to EU countries in return. The food and drink industry is the UK’s largest manufacturing sector. More than 50% of UK exports go to EU countries, Scotland even exports up to 78% of food and drinks to EU countries. However, the UK is still importing a lot more food from the EU than it exports. So, the outcome of the upcoming EU referendum will heavily affect the food and drinks industry. What would the consequences be of a Brexit for the food manufacturers in the UK and the EU?
What would a Brexit mean for trade?
Experts see a number of trade scenarios in the case of a Brexit. One possibility could be a free trade agreement with the EU, which would be a way to avoid duties or taxes. However, this would come with administrative barriers making it difficult and costly to abide by the terms for many companies. Other scenarios include bilateral trade agreements with the EU, which would require customs and duties to be paid. There is no certain outcome for trade in the case of a Brexit, but an increase of costs in some way seems likely for manufacturers. The Bremain supporters argue these will likely be passed on to consumers, resulting in higher prices for food and drinks in the UK. Whether customs and taxes will apply or administrative barriers require further investments, trade may not be as easy as it currently is.
But not only food manufacturers within the UK and other European countries would be affected by a Brexit. The EU currently has trade agreements with 53 countries around the globe. If the UK were to leave the EU, they would need to negotiate new agreements with these countries. In contrast, some experts do not see a pressing need for trade agreements at all.
What advantages could a Brexit have then?
Although the majority of UK exports go to EU countries, the share of exports to the EU has been falling over the last years. It is likely that export to our European neighbours will fall regardless of the referendum’s outcome. While renegotiating trade agreements requires some effort, Brexit supporters also see the chance to negotiate terms fit to the UK’s needs.
Generally, Brexit supporters do not expect that there would be huge changes if Britain left the EU. Most of the UK’s small companies also don’t believe Brexit would have a huge impact on their business as they do not engage in export. In fact, “Leave” campaigners believe that a Brexit has the potential to allow UK businesses to flourish as an increase in output and competitiveness is predicted.
What are the implications for non-EU countries?
Non-EU companies currently exporting to the EU and the UK may have to adapt to new UK regulations and potentially negotiate new trade agreements. For some companies, it might be more expensive to go through this rather than losing the UK as an export market. This isn’t expected to affect global players, but may affect some smaller or mid-sized companies.
How would the food and drink industry decide?
There have been various surveys on food and drink manufacturers’ votes in the EU referendum. The Guardian states that nearly three-quarters of the food and drink industry prefers to stay in the EU. A Brexit seems to be more favoured among smaller food and drink operators with 46% of them planning to vote to leave.
In the end, everyone has to decide for themselves, whether they believe the UK will be better off staying in the EU or leaving it. Have you made up your mind?
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