Britain’s minister for the environment, food and rural affairs has warned the country’s food and drink industry about how it could be affected by a possible no-deal Brexit.
Michal Gove told the nation’s producers to prepare for “considerable turbulence” if, as widely expected, Parliament votes against Prime Minister Theresa May’s European Union exit plan next week.
Food manufacturers already know their sector will be hit hard by a no-deal Brexit, which would see Britain trade under World Trade Organization rules.
Sixty percent of United Kingdom food and drink exports go tariff-free to EU nations. A study by Barclays has warned that after a no-deal Brexit, average food and drink tariffs would reach 27 percent. This is far higher than on other sectors, which would see an average rise of 3 to 4 percent.
For some UK food producers, WTO tariffs could spell disaster. Depending on the variety, cheese, for example, could incur tariffs of 40 percent to 50 percent.
“We do not make 50 percent margins in this sector, so the ability to absorb is minimal, if not nonexistent,” said a Dairy UK representative.
Ian Wright, chief executive of the Food and Drink Federation, says a no-deal departure would be a “catastrophe” for the industry.
With this in mind, British food and drink brands are being encouraged to look for alternative export markets-chiefly in China.
“As the reality of the changing trading environment emerges, there is concern that sales may start to fall in the EU after Brexit and many exporters are exploring opportunities in new areas further afield,” said Elsa Fairbanks, director of the UK Food and Drink Exports Association.
A House of Commons report on the impact of Brexit published last year said that China, India and the United States present some of the best opportunities for food and drink exporters looking beyond Europe.
After the United States, the Chinese mainland is already Britain’s second-largest food and drink export market outside of the EU. In 2017, China imported 567 million pounds ($721.8 million) of food and drink from the UK, up 29 percent on 2016.
Last week, the Agriculture and Horticulture Development Board, known as the AHDB, published strategy recommendations for traders looking to engage more with China, Japan and the US.
“These reports are a valuable source of information and will help us all gain a greater understanding of different food trends, eating behaviors and purchasing decisions around the world,” said AHDB international market development director Phil Hadley. “This is crucial if we are to grow our exports to new and existing markets outside of the EU.”
ADHB surveys showed that Chinese consumers show positive feelings toward British food. According to the report, brands promoting heritage, safety and nutritional benefits are likely to thrive in China, where “telling a story about Brand Britain” resonates with consumers.
Salmon is the UK’s biggest food and drink export to China, followed by pork, milk and cream powders, whisky and beer. The UK Food and Drink Federation, also known as the FDF, says there is growing Chinese interest in the UK’s “afternoon tea” products, including jams, scones, tea, and cakes. This has been linked to the popularity of British television programs, including Downton Abbey and the Great British Bake Of .
Sean Ramsden, chief executive of UK-based wholesale exporter Ramsden International, said post-Brexit, China has “huge potential” for exporters.
“It’s no secret that China has this growing middle class who are increasingly international in their outlook,” Ramsden said.
But the regulatory environment can prove daunting, he added.
“We’ve got access to a wide range of products but many of them are very difficult to get into the Chinese market,” he said, citing the complexity and frequent changes of regulations as one of the big challenges.
Ramsden expects more standard regulatory issues would help to increase the volumes of British trade in China.
The House of Commons report on Brexit and the food industry highlighted further barriers to trade with China. It said “high-level government-to-government relationships” in the food export sector were underdeveloped, and that not enough resources were being put into marketing the UK abroad.
A representative from pig farmer Tulip told the Parliamentary committee: “Denmark is a major exporter of pig meat and has 20 people sitting in China. In the UK pig sector, we have one person in China.”
The UK National Sheep Association said that in China, the UK government has “fallen down” at governmental and ambassadorial level, in terms of relationship building concerning food and drink.
The report recommended the UK government increase its efforts in this “high-level relationship building” in China to achieve trade agreements.