No deal would be disastrous
In a report published today on The impact of Brexit on the processed food & drink sector, the BEIS Committee says a no-deal would be disastrous for UK exports and must be avoided at all costs.
The Committee finds that a future move by the UK to lower or remove tariffs could have extremely damaging consequences for British farming with only the prospect of very limited benefit to consumers in terms of lower prices. The Committee’s report also examines the impact of non-tariff barriers, regulatory alignment, transitional arrangements, trade opportunities, and the food and drink sector’s critical reliance on migrant workers.
UK's largest manufacturing sector
Rachel Reeves MP, Chair of the Business, Energy and Industrial Strategy (BEIS) Committee, said:
"The processed food and drinks industry is the UK’s largest manufacturing sector, contributing £28.8 billion to our economy and employing hundreds of thousands of people throughout the country. British consumers are very discerning and rightly expect the highest food safety, animal welfare and environmental standards.
Consumers also value the variety and choice of products when they do their shopping. The success of the industry has been highly dependent on participating in the Single Market and Customs Union.
To ensure the continued success of our food and drinks industry, the Government must provide clarity and certainty on our future relationship with the EU and seek continued regulatory, standards, and trading alignment with the EU in the processed food and drink sector".
Northern Ireland border
The report also highlights frictions at the border between Ireland and the UK as being of particular concern given that the food and drink sector is highly integrated across the two countries. The report calls for a credible solution to avoiding a hard border to be found as soon as possible.
EU regulatory regime – food standards and consumer choice
The EU regulatory regime in food and drink is highly integrated, and the UK is a full member of the European Food Safety Authority (EFSA). The report notes that EU food regulation is viewed by the majority of stakeholders as positive for the food and drink sector, through geographical indicators, high food standards, harmonised food labelling, and that it already allows divergence.
The report finds a unanimous view in rejecting any 'race to the bottom' as UK consumers would not tolerate any lowering of standards. Most stakeholders supported the UK continuing its membership of EFSA after Brexit.
The Committee agrees with the sector that the UK should stay as close as possible to EU regulations after the EU and that key EU regulations must be preserved to maintain the competitiveness of flagship UK products and allow UK customers confidence in what they buy (e.g. Cheddar Cheese).
The Committee also expresses concern at the impact on the 96 per cent of food and drink SMEs for whom having to deal with another set of regulations will be burdensome and costly. The report recommends that the Government seeks to secure mutual recognition of standards as soon as possible to provide these businesses with the necessary certainty.
The processed food and drink industry relies on just-in-time delivery of products with short shelf lives and is heavily integrated with supply chains spread across the UK and the EU for sourcing raw materials, processing goods and selling them.
Having heard evidence from a range of witnesses including representatives from companies such as Diageo and Ferrero UK, the Committee’s report finds that non-tariff barriers, in the form of border delays and increased bureaucracy, will have an adverse impact on UK competitiveness. For instance, Diageo told the Committee that a 15-minute wait for each truck at the border between Ireland and the UK would cost £1.3 million per year to Diageo alone - potentially more for suppliers.
Food and drink sector critical reliance on migrant labour
Access to EU nationals is crucial to the hospitality and to the processed food and drink sectors, both relying heavily on EU labour at both unskilled and highly-skilled levels for meeting their existing skills gaps. According to the Migration Advisory Committee, 24.3 per cent of the sector's workforce was made up of EEA migrants in 2016.
The food and drink sector directly employs 400,000 people throughout the country, a third of whom are EU nationals. In the short term, the report calls for the Government to ensure that on leaving the EU, the food and drink sector can continue to have immediate access to the skills it needs. In the longer term, there is a strong need to work with the sector to meet its skills gap and ensure the sector is an attractive destination to UK nationals for a career.
Trade opportunities post-Brexit
The UK food and drink sector could stand to benefit from substantial growth opportunities beyond the European Union in the coming years. However, the sector does not see this as achievable without replicating all existing EU trade deals with third countries and negotiating preferential agreements with other countries that include mutual recognition.
The Government's priority in terms of opportunities for trade beyond the EU after Brexit should be to secure the roll-over of existing and forthcoming trade agreements. The report also finds that the opportunities are both relatively slight and distinctly uncertain, when set against the benefits to the consumer of free access to the current range of products facilitated by conformity with agreed standards.