1Introduction
The processed food and drink sector
1.The processed food and drink sector is the largest manufacturing sector in the UK with approximately 400,000 workers,1 a third of whom are EU nationals.2 SMEs account for 96 per cent of food and drink manufacturing businesses (a third of whom are manufacturers of bakery products), 27 per cent of employment and 19 per cent of turnover.3 The sector contributes £28.8 billion to the economy in gross value added (with £6.7 billion from beverages)4 and is growing, including in the aftermath of the EU referendum: from 2007 to 2017 food and drink exports have grown by 93 per cent, with an average annual growth rate of seven per cent.5 According to the Food and Drink Federation, there is still further potential to grow as the UK is currently “under-exporting”.6
2.UK food and drink exports were worth £22 billion in 2017, 60 per cent of which were to the EU. Ireland, France, the United States, the Netherlands and Germany are the UK’s top five food and drink export markets, contributing to 50 per cent of total UK food and drink exports. Half of the UK’s top 20 export markets were non-EU countries and identified as key priorities for future trade agreements.7
3.The sector is characterised by 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. Many manufacturers have factories in both the UK and the rest of the EU.8
4.The sector is also heavily integrated with the EU from a regulatory standpoint, although this varies depending on products and some divergence already exists.9 The sector also has an important R&D presence in the UK.10
5.The UK produces 61 per cent of its food usage11 and is particularly reliant on imports for fruits and vegetables and meat. Only for beverages do exports exceed imports.12 30 per cent of UK food imports come from the EU13 and the UK’s trade deficit is worth £24 billion.14 UK consumers are used to a menu of choice, year-round availability and price points that are currently achieved partly via this reliance on imports from the EU and elsewhere, especially for those products that are not produced currently in the UK or not available all year round.
Our inquiry
6.This is the fourth in a series of reports we are publishing on the impact of leaving the European Union on specific sectors of the economy.15 This report contains our assessment of the consequences for the processed food and drink sector of different outcomes of the negotiations and seeks to establish what type of withdrawal agreement would most benefit the sector and, consequently, the UK’s broader economic interests. We aim to inform public debate and influence the Government’s negotiating approach and priorities.
7.As part of this inquiry we received 18 submissions of written evidence from businesses and other stakeholders. We took evidence in public from some of them. We have received information from companies in confidence, which we do not publish but has nonetheless helped inform our conclusions. During a visit to Brussels we held private meetings with the UK Permanent Representation to the European Union and with FoodDrink Europe. We are very grateful to all those who have contributed to our inquiry.
1 Department for Environment, Food and Rural Affairs, Food Statistics in your pocket 2017: Food Chain, 14 November 2017, accessed 17 March 2018
2 Food and Drink Federation, Stats at a glance - Our sector in pictures, accessed 6 March 2018
3 Department for Environment, Food and Rural Affairs, Food Statistics in your pocket 2017: Food Chain, 14 November 2017, accessed 17 March 2018
4 Same as above
5 Food and Drink Federation, Exports snapshot 2017, p1
7 Food and Drink Federation, Exports snapshot 2017, p1
10 Food and Drink Federation, A New UK-EU relationship, Priorities for the food and drink manufacturing sector, July 2016, p6; Unilever BRF0019, para 2&6; Council for Responsible Nutrition UK BRF0016, para 22; Tate & Lyle Sugars BRF0012, para 23; Defra BRF0008, para 31
11 Tim Lang, Erik Millstone, Terry Marsden, A food Brexit: time to get real, Science Policy Research Unit, July 2017, p25
12 Department for Environment, Food and Rural Affairs, Food Statistics in your pocket 2017: Global and UK supply, 14 November 2017, accessed 17 March 2018
13 Department for Environment, Food and Rural Affairs, Food Statistics in your pocket 2017: Summary, 14 November 2017, accessed 17 March 2018
14 Food and Drink Federation, Exports snapshot 2017, p1
15 The Committee published its Second Report of Session 2017–19, Leaving the EU: implications for the civil nuclear sector, HC 378, on 13 December 2017; its Fifth Report of Session 2017–19, The impact of Brexit on the automotive sector, HC 379, on 1 March 2018; and its Sixth Report of Session 2017–19, The impact of Brexit on the aerospace sector, on 19 March 2018. A report on the pharmaceuticals sector will be published in due time.
Published: 22 April 2018