With nine months to go until the UK is set to officially leave the EU, politicians are still battling it out to resolve complex trade and regulatory issues two years after the Brexit referendum. The UK food industry can only sit and watch events unfold but is eager to see concrete resolutions so they can get on with planning for an exit. Simon Harvey went to the UK Food and Drink Federation’s annual convention to hear what delegates had to say.
Frustration might be the best word to describe the mood at the annual convention of UK trade body The Food and Drink Federation in London on Wednesday (13 June), where the lack of progress on Brexit was a key discussion topic, adding to the widespread “uncertainty” that has prevailed for the past two years.
But amid all the wrangling and political debate in the UK over a customs union, a single market, a ‘hard’ or ‘soft’ Brexit, a frictionless border, the future regulatory framework, foreign labour, and the withdrawal bill, among a myriad of many other pending issues, two themes are emerging within the country’s food industry – a lack of collaboration and an emphasis on tapping markets outside the EU.
And with time fast running out to get a deal done with the EU – to the chagrin of not only the food and drinks industry, but UK businesses in general as they take a back-seat in the negotiations – some speakers at the FDF conference stressed the need to buy more time. But then how much more time is needed with a 21-month transition period already agreed upon, which will maintain the current status quo with the trading bloc until December 2020?
So caught in the throes of the Brexit process, the food and drink sector is starting to acknowledge the need for greater cohesion and communication between its manufacturers, regulatory bodies and food-safety agencies, as well as more input into government decision-making from an industry that generates more revenue than the UK’s automotive and aerospace industries combined.
A video presentation noted the importance for the FDF to bring together the disparate forces and to make sure the UK government is aware of what the food and drink industry requires in order to be ready for Brexit and to make sure politicians understand the level of threat to the industry and what can be done about it.
FDF director general Ian Wright said the industry faces three main challenges from Brexit: the availability of labour; agreeing upon a regulatory framework – “will it be more fragmented in the future than it is at present?”; and customs and tariffs – “how we will be able to import and export through what we hope will be frictionless borders of the kind we have today?”
“Maintaining those three areas in their current state is our absolute priority,” Wright stressed.
The conference was gathered among the artefacts at the prestigious British Museum while UK politicians prepared to vote on rules and amendments to the withdrawal bill three miles away in Westminster.
Keynote speaker Greg Clark – the UK Secretary of State for Business, Energy and Industrial Strategy – briefly addressed the conference before he was whisked away 22 minutes later to attend the parliamentary hearing.
Still, he offered little to the conference in the way of substance with respect to the job in hand but highlighted the Government’s commitment to investing in the food and drinks industry, while lauding the formation in November of the Food and Drink Sector Council, a partnership with businesses aimed at boosting productivity and competitiveness.
Meanwhile, Labour MP Hilary Benn – chair of the Exiting the EU Select Committee in the House of Commons, the UK’s lower legislative house – was also pre-occupied with the day’s events at Parliament and could not make his scheduled speech, instead transmitting his presentation from Westminster.
The Ireland perspective
The issue of the Republic of Ireland has become a key sticking point, and whether trade will flow freely between the EU member state and the UK, namely Northern Ireland, under any Brexit deal as it does today.
In a indicator of the importance of those discussions, Michael Creed, the Irish Minister for Agriculture, Food and Marine, said he has spent more time in London recently than he has at home.
The Republic exports 90% of its food and drinks products it produces, and between 2010 and 2017 its agri-food exports rose to EUR13.6bn (US$15.8bn) from EUR8bn, with a target of EUR19bn by 2025, Creed pointed out. The UK alone accounted for EUR5.2bn of that pie last year, he added.
“We need conclusions on transition and withdrawal by October because it needs the approval of Parliament,” Creed noted, referring to the key EU summit on 18 October when the UK and the EU are expected to agree an outline on future trade relations before ‘Brexit day’ on 31 March.
But before October another EU summit is due on 28 June, which may include key discussions on the Ireland border issue, an issue that Creed says “transcends economics”.
“We believe we are stronger as a member of the EU”, but respect the UK’s choice to leave, the minister acknowledged.
“No deal, and consequently no transition, is the worst of all outcomes for everybody,” Creed warned.
To the amusement of the audience, Creed said in the early days after the Brexit vote he was told by a senior politician, who he wished not to name, that “with goodwill on all sides this could be resolved in six weeks”. At the time, the complexity of Brexit was “not widely understood”, he added.
“There are serious issues at stake in these negotiations. It will be farmers, businesses and consumers in Ireland, the UK and the EU who bear the brunt of a bad outcome. We need realistic and complete solutions for the challenges that face us and we need them very soon.”
The need for more cohesion
During a panel discussion juggling a number of Brexit-related issues, Joseph Owen, the associate director at the Institute for Government, emphasised the importance of building a better relationship between politicians and business.
All too often talks with ministers are met with what he called “the Churchill the dog effect” of nodding heads instead of providing “much back the other way”, a trait that needs to “shift” from the perspective of negotiation and implementation.
We are “at a critical point where things need to change gear”, Owen said with respect to engagement with business. The government has gone into this “huddle mode” where it is just senior politicians, senior civil servants, and advisers, and “we are really not getting much information coming out”, he added.
Stuart Roberts, the vice president of the National Farmers’ Union, was more hard-hitting but at the same time very passionate, particularly of course with regard to his own members.
Using the example of the recent snowfall in the UK that disrupted food deliveries and affected crops, he noted consumers would tend to get angry with politicians if there were food shortages, not farmers, and not the retailers or food processors.
“We need to hold politicians to count,” Roberts said. “Going forward, we are going to see politicians in the UK exposed like never ever before. They can’t hide behind Brussels.”
When asked what is his key priority is among labour, trade and regulation, he replied: “Ultimately, it’s trade, trade and trade” but, at the same time, in terms of investment he added “we need to see more collaboration in the food-supply chain”.
“We are going to need in years to come, ministers and industry working harder than ever before – getting on aeroplanes, getting out there, finding markets, opening markets – and then our industry exploiting those markets. I think that will require a shared vision and a lot of work by the food sector council to drive us on the road.”
“We need certainty so that we can start to plan,” he said in answer to his best-case scenario.
Opening up the time clock
Miriam Gonzalez, the co-chair at law firm Dechert LLP’s International Trade and Government Regulation practice, said the UK needs more time given the current negotiation process is not yielding results from Parliament, which she described as a “distraction” from a business perspective.
Article 50 – the trigger pulled by Prime Minister Theresa May that put the UK on course for Brexit following the referendum – must be extended to give industry more time to prepare, she said.
“We need to reset negotiations as they are not going in the right direction,” she replied when asked what her advice to the business community would be. “Something that is very clear is that it’s difficult to trust this negotiating team. Pretty much every business is dissatisfied with where the negotiations are going.”
Gonzalez believes the UK is still far from where it needs to be with respect to reaching new agreements with the EU on market access and regulation, which must stay as close as possible to current arrangements, or what she calls “a fake Brexit”.
“The best thing that could happen to this country is that we get more time under article 50,” she answered in reply to the best-case scenario question.
Access to other markets
As mentioned, the transition agreement allows frictionless trade to continue between the UK and EU until December 2020, and also enables the UK to strike its own trade deals with other partners, but they will not be permitted to come into force until 1 January 2021.
However, in the eventuality of no trade deal being reached beyond the transition period, the UK would be required to operate with the EU under World Trade Organization rules, an outcome that may see the imposition of customs checks, tariffs, and in turn, border delays.
While the Republic of Ireland has formed trade agreements with other partners, particularly China and the US, Minister Creed said without the EU legal framework the process of getting into Asia’s largest economy would have been more complicated.
He said Ireland’s agri-food exports to China increased from EUR200m in 2010 to EUR800m in 2017, and exceed EUR1bn per annum to the US. And to boost trade further with other countries, Creed will lead a delegation to Indonesia and Malaysia later this year to develop more opportunities, despite Brexit.
And UK Shadow Secretary of State for International Trade, Barry Gardiner, highlighted the importance of maintaining the UK’s high food quality and safety standards post-Brexit, facets that have attracted overseas trading partners.
“Our selling point is premium products,” and that is why China and India want them, not price, he said.
Clark briefly expanded on that theme to say the UK food and drinks sector “starts from a position of strength” within the Brexit context.
Time running out
But, there is still some way to go in the negotiations, with talks still to take place on future EU relations, including agreements on defence, terrorism and food regulation that cannot be decided until the UK leaves the bloc in March.
Labour’s Benn asked: “Where are we? Well we are in a bit of difficulty because here we are nearly two years on from the referendum. The Cabinet is still debating what kind of customs arrangements, and therefore what kind of trade arrangements it wants to have with our biggest, nearest and most important trading partners – the 27 other member states of the European Union. And time is running out.”
He said while agreements have been reached in principle on the money the UK owes the EU and the movement of EU citizens, which is “really important because we must ensure we don’t fall off the edge of the cliff”, we still need to find a solution on the “challenge of keeping an open border between Northern Ireland and the Republic”.
He added the UK’s proposals in its so-called backstop offer do not go far enough because it includes customs and goods, but not regulations and the operations of the internal market. And those proposals need to be in there to satisfy EU officials if progress is to be made at the summit later in June.
That is the reasoning behind Labour’s request for a provision to be made for an extension to the transition period in order to buy more time.
Ultimately, it will come down to Parliament to accept the withdrawal agreement in October, Benn said, urging the food and drinks industry to speak up now and “argue your case” for what you want.
“It’s Parliament’s job in the end to listen and make a judgement.”