Conclusions and recommendations
Impact of tariff barriers
1.Should the UK continue to export the majority of its products to the EU, a no deal scenario with WTO tariffs would have a seismic impact on the sector’s performance and the competitiveness of exports, especially for some of the UK’s top ten processed products, such as chocolate, cheese, beef, pork and soft drinks. A no deal scenario would be unviable and unacceptable to the sector as, at least in the short term, the EU is the UK’s main trading partner. It would also have serious repercussions for importers of UK products in the EU and the rest of the world. (Paragraph 21)
2.We welcome the Government’s intention to negotiate a new trading partnership with the EU as early as possible. Striking a free trade agreement with the EU should be the number one priority in order to protect the UK processed food and drink sector’s competitiveness in the short term. (Paragraph 22)
3.The current UK trade deficit in food and drink means that imports will continue to play a crucial role at least in the short term. We agree that leaving the EU creates new opportunities to import more low-price products from non-EU countries. However, the impact of removing external tariffs on imports could be extremely severe for British farming and have a limited impact on prices for consumers. However, the impact of removing external tariffs on imports could be extremely severe for British farming and have a limited impact on prices for consumers. The Government will have to carefully balance the impact that non-EU imports could have on the competitiveness of UK businesses and the cost of timely deliveries with the merits of continuing to rely primarily on EU imports. (Paragraph 23)
Non-tariff barriers
4.We did not hear any evidence suggesting that moving away from the current customs arrangements could be beneficial to UK manufacturers or consumers as it would inevitably incur some additional checks, delays and costs. If a solution that is as frictionless as possible is not agreed in time for after the transition, even a few additional non-tariff barriers could prove very challenging at UK border points and have a serious impact on small and medium suppliers, especially between Ireland and Northern Ireland. It will also affect the type and price of products available all year round to consumers. (Paragraph 36)
5.We welcome the fact that the Government managed to negotiate preserving the status quo during the transition period but the sector needs certainty beyond that point. We urge the Government to end the uncertainty regarding future customs arrangements by negotiating a new partnership with the EU as soon as possible. In order to minimise potential increases in food costs, it should prioritise securing as few additional border requirements as can be negotiated. (Paragraph 37)
6.The Government will have to put considerable resources into increasing customs capacity at UK border points and should put forward proposals on the type of support it will provide for SME and large suppliers in transitioning towards a new customs model. (Paragraph 38)
7.In order to support trading communities on both sides of the border, the Government should prioritise developing proposals that provide businesses with clarity regarding future customs arrangements at the border between Ireland and the UK. (Paragraph 39)
Regulatory alignment
8.We agree with the sector that overall the UK should stay as close as possible to EU regulations after we leave the EU. This would facilitate exports to the EU market and build on consumer trust for EU-branded products. Key EU regulations like geographical indicators must be preserved to maintain the competitiveness of flagship UK products and to allow UK consumers confidence in what they buy (eg. Cheddar cheese). (Paragraph 44)
9.We conclude that large manufacturers are already used to dealing with different regulations for different national markets and could probably adapt if they were given enough time and certainty to do so. Nevertheless, this is not something that all of them will welcome and it should only be done where it presents a clear advantage for British businesses and British consumers. (Paragraph 48)
10.We recognise that there are opportunities to diverge once we leave the EU that would make some UK products more competitive, although these gains need to be balanced against any consequent reduction in access to EU markets. We welcome the Prime Minister’s assurances against any race to the bottom in standards. Our biggest concern is 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. They will need Government support and time to adapt. As a result, we recommend that the Government seeks to secure mutual recognition of standards as soon as possible to provide these businesses with the necessary certainty. (Paragraph 49)
Transitional arrangements
11.The transition period that was recently negotiated with the EU is significantly shorter than what the sector had hoped for. This may prove challenging for businesses that may struggle to find the time and have the necessary expertise to familiarise themselves and adjust to the system in place after we leave the EU. (Paragraph 54)
Trade opportunities post-Brexit
12.We welcome the Government’s Food & Drink Action Plan and any other initiatives to boost UK food and drink exports. We believe this cannot be done without seeking a free-trade agreement with the EU as a priority given the sector’s current reliance on the EU as an export destination. The Government should also prioritise the roll-over of existing EU trade agreements to the UK and then focus on establishing new free trade agreements with third countries. (Paragraph 60)
Skills
13.The processed food and drink sector is heavily reliant on EU (and EEA and Swiss) workers, especially workers from New Member States, for low-skilled and high/medium occupations. The proportion of UK and Irish workers in the sector’s workforce has steadily declined since 2000. Staff shortages are already a problem in the food and drink sector and the sector’s skills gap is predicted to worsen as its ageing workforce retires. (Paragraph 70)
14.In the short term, the Government should ensure that once we leave the EU the sector can continue to have immediate access to the skills it needs. A visa system will add costs and bureaucracy to a sector dominated by SMEs who lack the resources and expertise to deal with a new immigration system. The sector needs support as soon as possible to adapt. (Paragraph 71)
15.The Government must also continue to work with the sector to meet its skills gap and ensure the sector is an attractive destination to UK nationals for a career. (Paragraph 72)
Research and Development
16.We welcome the Government’s commitment to match funding for all EU-funded R&D projects awarded before we leave the EU. The Government should now clarify the level of access to EU nationals and EU facilities that will be available to the food and drink R&D sector after the transition. (Paragraph 76)
17.We welcome the Prime Minister’s aim to retain some form of membership with some EU agencies. We would welcome clarity on the type of associated membership that the EU would allow for the UK in the European Food Safety Authority and its future interactions with the Food Safety Agency. (Paragraph 77)
18.The Government should seek to maintain UK’s membership of collaborative EU R&D projects, while clarifying approval processes and the role of the Food Safety Agency beyond March 2019. (Paragraph 78)
Published: 22 April 2018