UK Food Firms Warn of Brexit Fallout

Feb. 1, 2019
Food companies are increasingly concerned that their concerns about Brexit seem unheeded by the government.

Food companies are increasingly concerned that Brexit will lead to chaos in their operations, and are frustrated that their concerns seem unheeded by the government.

Brexit, the United Kingdom’s withdrawal from the European Union approved by voters in 2016, is due to take place March 29. To date, the EU and the British government have been unable to reach an agreement about the terms of the withdrawal, with the UK’s Parliament rejecting an accord negotiated by Prime Minister Theresa May. If no agreement is reached, the result will be a so-called “hard Brexit,” presumably with customs inspections and other barriers to the now mostly seamless trade between the UK and Europe.

The governor of the Bank of England stated that British food prices overall could rise up to 10 percent with a hard Brexit. Some of the biggest problems involve bottlenecks that are liable to spring up in cross-border trade. The UK imports nearly a third of its food. If every truckload of imported food has to be inspected, the flow into the country will be considerably slowed – something that could be disastrous for perishable items. In winter, the UK imports roughly 90 percent of its lettuce, 80 percent of tomatoes and 70 percent of strawberries. In addition, UK farmers would find it harder to sell their products to Europe, since they would suddenly become subject to quotas and tariffs.

A panel of food retailers and quick-service restaurant executives signed a letter to all members of Parliament, warning of the consequences of a hard Brexit: “As prudent businesses we are stockpiling where possible, but all frozen and chilled storage is already being used and there is very little general warehousing space available in the UK. Even if there were more space it is impossible to stockpile fresh produce, such as salad leaves and fresh fruit.”

The CEO of Mondelēz International told stock analysts Jan. 30 that there would be a “huge” difference between a hard and soft Brexit. Dirk Van de Put said that Mondelēz is renting more trucks and warehouses and increasing inventories to prepare for the eventuality. He added, however, that whatever happens with Brexit, he expects the company’s business to stabilize over the long term.

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