3Export support
45.There was a widely held view that the UK does not fully develop export opportunities. The AHDB stated that UK Government investment was “not of the scale of countries such as the USA and Ireland who deliver coordinated marketing activities funded by Government to develop export and international opportunities”.113 The NFU stated that “it’s widely accepted that the UK is typically behind the curve in exploring and developing export potential, for instance when compared to Ireland”.114 Jeff Grant, Red Meat Sector Representative, Beef and Lamb New Zealand and New Zealand Meat Industry Association, explained that:
in New Zealand, we have shifted over the last 30 years to outcome-based proposals. Whereas, before, it would have been a directive from the Government on expenditure or direction, it is now a partnership between the industry and the Government in what we do. […] The marketing area, for example, is driven by the private sector, so the exporting companies do that.115
46.The FDF highlighted that “more than half of the total value of UK food and drink exports is produced by just 1 per cent of exporting companies, while SMEs currently make up 37 per cent of the total value of UK food and drink exports”.116 It considered that “significant value growth in our sector’s exports can be delivered by enabling more SME businesses to begin exporting and by helping existing exporters to expand”.117 Exports “currently account for a small percentage of companies’ overall UK turnover at under 10 per cent” and “ONS data shows that fewer than one in five UK food and drink manufacturers actively export, just half that of the Republic of Ireland (40 per cent) and Spain (38 per cent)”.118
47.In 2017, Defra identified “perceived barriers to exporting for food and drink SMEs”, such as:
a)Little intelligence on foreign markets;
b)Anxieties about engaging with multiple regulatory frameworks;
c)Language barriers;
d)Capacity and finance/resource constraints;
e)Apprehensions about the post-EU exit environment; and
f)Access to joined-up exporting advice.119
The Provision Trade Federation highlighted that “small and medium companies tend to concentrate on value-added, high quality end products” and “these companies are the ones that often require most support and guidance because they do not have access the global export resources that larger companies do”.120 The FDEA stated that:
Many of the top UK food producers have long standing relationships with the UK retailers. They have dedicated factories, product development teams, integrated IT systems and distribution channels to deliver ‘just in time’. It is very difficult to persuade these companies to take the step into the unknown, and difficult for their management teams to convince investors to risk their cash.121
48.Disparities in regional support across England were highlighted by Sandra Sullivan from the FDEA, who explained that “there is a lot of advice and knowledge that needs to get out to these companies to give them the confidence to be able to export” and argued that:
Scotland, Wales and Northern Ireland all have very strong national promotional events and plans around food and drink. England is dependent on which region you happen to be in. Some of those have ERDF [European Regional Development Fund] funding. The south-west at the moment, for example, has ERDF funding […]. Therefore, the companies in those regions are getting more financial support in terms of getting them export ready. Having something that is more of a level playing field across the country would be a good starting point.122
49.Sandra Sullivan considered that, post Brexit, there should be a national scheme across England, rather than the current “postcode lottery”.123 The Food and Drink Federation (FDF) agreed that “provision of specialist food and drink export support is highly fragmented” and added that “Scottish companies informed us that they typically receive additional support in the form of funding, networking opportunities and meet the buyer events as a result of the priority given to food and drink by the Scottish Government, which provides strong backing to Scotland Food & Drink”.124 The FDF has, through its proposed Sector Deal, suggested creating a “Food and Drink Export Portal” website to:
a)signpost existing Government and private sector export information and support;
b)promote DIT export opportunities;
c)highlight Government and private sector missions/events;
d)promote sector-specific guidance; and
e)build a directory of exporters to inform export support and priorities.125
50.Between 2014–2018, 47 per cent of ERDF funding went towards enhancing the competitiveness of SMEs, equating to £655 million.126 The Government is expected to publish a consultation on the UK Shared Prosperity Fund, which would replace EU structural funding (including the ERDF) after Brexit.127 The Government has stated that “final decisions on UK Shared Prosperity Fund will be made during Spending Review”, due in autumn 2019.128 Defra’s March 2019 guidance on European Regional Development Funding (ERDF) in a ‘no deal’ Brexit stated that “the draft Withdrawal Agreement […] would mean that the UK would continue to participate in the European Regional Development programmes until programmes end in 2023”.129 In the event of a no-deal Brexit, the Government would “guarantee certain EU projects agreed before we leave the EU”, including ERDF projects and all projects “that would have been funded by the EU under the 2014–2020 programme period”.130 The Investment Minister told us that “DIT is planning that from 2020, […] ERDF co-investment funding for high-growth SMEs will be provided through an internationalisation fund”.131
51.Improving export support for businesses is vital for improving the marketing and promotion of British food and drink more widely. The current postcode lottery of regional support for companies in England that wish to start or increase exporting is undesirable. We commend the initiative shown by the industry to improve this through the proposed Food and Drink Manufacturing Sector Deal proposal. This must, however, be underpinned by Government strategy. The Government should publish its consultation on the Shared Prosperity Fund. The consultation should include proposals on enhancing the competitiveness of SMEs, with a sectoral breakdown, including the food and drink manufacturing sector. In designing new support for English companies, the UK Government should examine what it can learn from the support provided by the Devolved Governments to SMEs in their nations.
Tradeshow Access Programme
52.The Government’s Tradeshow Access Programme (TAP) provides grant funding for eligible UK businesses towards the costs of exhibiting at overseas trade shows.132 Each year, the Department for International Trade (DIT), with the relevant TAP trade challenge partners (for example, the FDEA), agrees which overseas trade shows they will support UK businesses to attend.133 Individual organisations may receive a maximum of six grants in total.134 Grant levels are between £500 and £2500 and “must not exceed the business’s own expenditure on direct exhibiting costs”.135 The eligibility criteria changed from April 2019, so that in order to qualify for a grant, an organisation must be either:
a)a small or medium-sized enterprise (SME) which is defined as an entity engaged in economic activity with less than 250 employees, and an annual turnover not exceeding €50 million or an annual balance sheet total not exceeding €43 million; or
b)a business or organisation with less than 250 employees and an annual turnover of between £83,000 and £5 million (the Government aims to have at 75–85% of participants in this category across the 2019 to 2020 programme of TAP-supported events); or
c)a UK university, UK government funded centre of higher or further learning or UK government funded research organisation.136
53.The National Pig Association stated that the TAP was “the single most successful scheme for small and medium scale enterprises to break into new markets” and recommended that “support for this scheme should be increased and the rules on the number of shows that companies can attend should be reviewed”.137 We asked Sandra Sullivan, FDEA, whether the TAP provided enough funding and attendance opportunities for businesses and she responded “no is the simple answer”.138 She highlighted that:
the TAP scheme years ago was more generous […] In 2002, as far back as my records go, I think the TAP budget was £21 million. […]. It is now more restrictive. You used to be able to get six supported participations at European shows and then six in developing markets. That has been taken away and I think that has had a very negative effect on getting people out to these markets where the new growth opportunities are. They are using up their lifelines quite quickly at the major European shows and then do not really have that incentive to go out and take a look at some of the new markets.139
54.We asked the Investment Minister whether funding for the TAP scheme had declined. He told us the Government had tried to “make sure it is as focused as possible on its primary purpose, which is to get people going into it” and that “what we did not want to do is find we were funding the same people who managed to tap into it”.140 He acknowledged that restrictions had “upset some people” but considered that “we have to strike a balance and […] most people seem to be supportive”.141 He added that “the 2018–19 total TAP programme is forecast to support 317 events and provide 3,338 grants to SME businesses”.142 Figures subsequently shared with us by the Government showed that the budget for the TAP scheme has significantly reduced since 2014 and has been underspent every year:
Table 1: Tradeshow Access Programme (TAP) funding between 2014–2019143
|
Year |
TAP Budget £m |
TAP spend £m |
Food & Drink TAP spend £k |
|
2014–15 |
11.3 |
11 |
546 |
|
2015–16 |
10 |
9 |
472 |
|
2016–17 |
8.1 |
7.7 |
399 |
|
2017–18 |
7.5 |
6.5 |
311 |
|
2018–19 |
6.5 |
6.4 |
277 |
|
2019–20 |
6.5 |
- |
- |
The Government explained that “the core programme is agreed in consultation with stakeholders and ensures the right mix of events and attendees is selected to deliver the best value for UK business and the taxpayer and aligns with the Department’s objectives”.144
55.Getting out to international trade shows is crucial to promoting British food and drink abroad. The Tradeshow Access Programme (TAP) is seen by industry as an important way for companies, particularly SMEs, to promote their businesses and break into new markets. We accept that there may have been satisfactory reasons for the budget to have declined slightly until 2016. However, following the EU referendum, the Government should have anticipated the increased necessity for British businesses to access and promote themselves to new markets. Instead, TAP spend on food and drink has declined by 10 per cent since 2017/18, as part of an ongoing trend of decreased funding. Opportunities for companies to access grants have become more restrictive, although we welcome the increased focus on SME participation.
56.Given the Government’s export ambitions, the Tradeshow Access Programme should be reviewed urgently, in consultation with industry and trade associations. Funding should be reviewed and potentially increased as part of the upcoming Spending Review.
57.In its response to our Report, the Government should explain why the TAP budget has been underspent every year since 2014/15, particularly when the number of grants available per company have also decreased.
In-market specialist support
58.In January 2015, the Government appointed Karen Morgan as the UK’s first Agriculture and Food Counsellor in China to “help increase our growing food and drink exports to the country”.145 The role was designed to “help British firms tap into China’s growing interest in speciality foods - a market expected to be worth a potential £39 billion [in 2015]”.146 Karen Morgan has since been replaced by Ray Smith.
59.We found widespread support for the Agriculture and Food Counsellor, which was described as “an excellent example of how it is a positive, helpful thing to have somebody on the ground”.147 Katie Doherty, Policy Director of the International Meat Trade Association, gave examples of impact:
when there have been media stories in the UK that might say something about UK food and it has not necessarily been true, then she has been able to go in and talk to officials and say what the facts are, to make sure that the UK brand is not hit by that. […] Where there might be certain import conditions, she would be able to go in and talk to the authorities over there to understand better. She plays a role in facilitating some of the inward inspections that China has over in the UK, so it is a conduit and facilitation role and that is very beneficial.148
60.The food and drink industry was keen to see the numbers of such specialists increased. The Food and Drink Manufacturing Sector Deal proposed “actions that would work together to enhance export volumes and values for business of all sizes” including “Market Access Assistance to put in place food and drink sector specialists in markets that offer the greatest opportunity for growth but are difficult markets for businesses to access”.149 The FDF suggested that “initial priority markets would be China, India, Japan, USA and UAE and could be based on a similar model to the existing [Defra and AHDB] one in China”.150
61.Ray Smith explained that Karen Morgan’s initial task “was to set up a team and start the process of market access” and that her job was “to carry on the good work that she has been doing and to grow the Chinese understanding of the UK offer and the different products that we would like to export to China”.151 She confirmed that “AHDB funds 90% of [her] posting”.152 When we asked whether the Government should increase the number of agriculture, food and drink counsellors overseas, she replied that:
Every country is different. China is a very complicated regulatory framework and there is a lot of merit in having a UK diplomat to open the door. I have a very capable, locally engaged Chinese team, which does most of the work, but when it comes to getting in at a high enough level I need to be present in the room. That may not necessarily be the case in other countries, so you may not need someone from the UK to be the representative for agriculture, food and drink. While you may need a named person, they do not necessarily need to be a UK diplomat.153
62.Phil Hadley, AHDB, agreed that the role “would be tailored to suit the individual countries, because of the complexities and challenges that each country offers”.154 He stated that AHDB broadly supported “the countries that have been identified for ag counsellors” by the FDF but added that “the FDF proposal is broader, so we have to recognise that some of those positions are in markets that might have a great opportunity for UK plc, but not necessarily for our raw agricultural commodities”.155
63.Ray Smith highlighted that “AHDB members know that we exist” because she worked “closely with AHDB at trade conferences, and we keep each other apprised of what is going on in the Chinese market”.156 However, she explained that there was a wider lack of awareness of her role:
The problem is not with the exporters of commodities like pork; it is more with the SMEs that are new to exporting and do not know where to go for support and help. Often those companies are surprised when we come to a trade show and say, “Did you know you can come to us for this advice and that advice?” They have no idea that a team in the embassy exists to support them and give them that advice. […] Most people think embassies are just about visas.157
64.We asked the Government whether it would accept the proposed Sector Deal, which suggested increasing the number of food and drink specialists in key markets. The Investment Minister stated that Government was “supportive of it” and “want to see it happen”.158 The Food Minister was unable to specify a timescale, stating that “the negotiations are ongoing but they have been slowed because the focus in the industry and across Departments has been on EU exit”.159 The Investment Minister explained that “we are not waiting for the sector deal to get on with certain other things” and that:
We are seeking to improve in-market support in other regions. The Government are boosting our overseas network of posts focusing on agriculture, environment, fisheries and trade negotiations, with four posts spread across Canberra, Ottawa, Wellington and Tokyo. As a result of ongoing support from DIT and Defra working together, DIT Dubai will access regional FCO funding to recruit an agriculture, food and drink counsellor for the Gulf region.160
65.Having a dedicated food and agriculture specialist on the ground in China has proved to be helpful for market access and maintaining ongoing dialogue about British food and drink. Diplomatic and trade relationships are built over time and we therefore expect this presence in China to continue. We are satisfied that the Government is taking action to increase the numbers of such specialists in other key markets.
66.Currently, the AHDB funds 90 per cent of the Food and Agriculture Counsellor in China. This has led to useful synergies, but, as the AHDB is a levy-funded organisation, this means the role is essentially funded by British food and farming businesses with a focus on raw agricultural commodities. However, the UK’s strengths also lie in exporting value-added and branded products. Although the AHDB should continue to provide some funding, we recommend that Food and Agriculture Counsellors in other markets are co-funded by the Government and the wider food and drink industry.
67.Unfortunately, too few British exporters know about the work of the Food and Agriculture Counsellor in China, aside from AHDB members. As well as increasing the numbers of counsellors, the Government should ensure that their existence is better communicated, particularly to SMEs. As a minimum, the counsellors should be identified on each embassy’s website and the new export portal proposed under the Sector Deal. They should also regularly participate in UK food and drink industry events and conferences.
126 The UK Shared Prosperity Fund, Briefing paper 08527, House of Commons Library, May 2019, p 6
127 The UK Shared Prosperity Fund, Briefing paper 08527, House of Commons Library, May 2019, p 6
129 Department for Business, Energy and Industrial Strategy, ‘European Regional Development Funding if there’s no Brexit deal’, accessed June 2019
130 Department for Environment, Food and Rural Affairs, ‘European Regional Development Funding (ERDF) in a ‘no deal’ Brexit’, March 2019
132 Department for International Trade, ‘Tradeshow Access Programme (TAP)’, May 2019
133 Department for International Trade, ‘Tradeshow Access Programme (TAP)’, May 2019
134 Department for International Trade, ‘Tradeshow Access Programme (TAP)’, May 2019
135 Department for International Trade, ‘Tradeshow Access Programme (TAP)’, May 2019
136 Department for International Trade, ‘Tradeshow Access Programme (TAP)’, May 2019
145 Department of Environment, Food and Rural Affairs and Agriculture and Horticulture Development Board, ‘UK appoints first Agriculture and Food Counsellor in China’, January 2015
146 Department of Environment, Food and Rural Affairs and Agriculture and Horticulture Development Board, ‘UK appoints first Agriculture and Food Counsellor in China’, January 2015
149 Food and Drink Federation, ‘Food and Drink Manufacturing Sector Deal Proposal’, accessed June 2019
150 Food and Drink Federation, ‘Food and Drink Manufacturing Sector Deal Proposal’, accessed June 2019
Published: 27 June 2019