- UK food sector less optimistic than the rest of world over medium-term outlook
- European food companies expect short, sharp Brexit shock
- Almost half of UK companies think it will take at least five years for consequences to be understood
UK food companies are more downbeat on the medium-term prospects for the global food industry than their European neighbours in the wake of the country’s decision to exit the European Union, according to a new survey carried out by just-food.
When asked to rate the outlook for the global food sector over the next three to five years, on average UK executives scored the industry a 5.6 out of ten, below the confidence levels expressed by food companies from European countries excluding the UK, who scored it 6.1 out of ten, and the rest of the world, who rated their confidence at 6.2.
Some 31.9% of UK executives said their confidence in the medium- to long-term prospects in the global food industry had been “reduced” or “significantly reduced” in the past three months. However, more of their counterparts across the English Channel appear to now have a gloomier outlook over the next three to five years, with half of food executives reporting a fall in confidence.
Among food sector professionals based in the rest of the world, 28.6% reported their outlook had “reduced”, although none rated it “significantly reduced”.
Rating the prospects for the industry over the coming three to 12 months, both European and UK executives included in the survey ranked their confidence 5.7 out of ten. Executives from outside Europe were more upbeat and their ranking remained consistent at 6.2.
Again, Europeans were more prone to have lowered their expectations for the global sector following the Brexit referendum. In total, 52.7% of European executives have cut their outlook for the next three to 12 months, compared to 45.2% of UK food companies. Those outside both the UK and Europe were again the least pessimistic, with 42.8% lowering their short-term expectations for the global sector in the past three months.
The majority of European food executives, 71%, believe the “implications for the global food industry” will be fully understood within two years. UK food makers, on the other hand, tend to believe it will take longer for the consequences to become clear. Only 55% believe the implications will be revealed within the next two years, while over 45% believe the consequences will continue to become evident in five years or more.
“The UK’s vote to leave the European Union has hit the confidence of British and European food makers,” just-food’s deputy editor Katy Askew said. “While Europeans expect to feel an immediate aftershock from Brexit, UK food makers anticipate the consequences will be longer lasting. This reflects the prospect of drawn-out withdrawal negotiations and has dampened medium-term confidence in the UK.”
The UK food sector’s nervousness over the medium term is a reflection of the challenges it faces due to Brexit. In the near term, currency swings and the devaluation of the sterling have the potential to push up input prices for UK firm’s buying raw materials overseas. In the longer term, access to European markets and workers also need to be secured to support growth, UK industry body the Food and Drink Federation argues.
With 70% of overseas trade in UK food and drink conducted with the EU, the FDF is lobbying for tariff-free access to EU markets to be retained.
Additionally, the skills shortage already faced by the industry could be deepened in the wake of Brexit. EU nationals make up 27% of the UK food and drink sector workforce and the FDF wants future UK migration policy to enable the industry to access the estimated 130,000 new skilled workers it will need by 2024.