Brexit fallout could impact heavily on food suppliers, restaurants in UK

January 14 , 2019

From the pages of Produce Business UK

The imminence of Brexit has led to uncertainty across all industries in the UK. Businesses, including suppliers or traders, as well as employers themselves, have little sense of what is to come, even though a decision is fast approaching. 

Although the UK supplies 50 per cent of its own food, it imports approximately 30 per cent of unprocessed food from the European Union, making the EU a major trading partner, according to UK government statistics.

As politicians grapple with dozens of options, the effects on the supply chain are inevitable. In terms of produce, there are myriad concerns. From farmers reassessing the spare parts that come from the EU to restaurant owners potentially re-crafting their menus, people in the industry are speculating and preparing as much as they can amid the uncertainty.

Produce Business UK talked with two top people from different areas of the food industry for perspective on some of the most pressing issues.

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Who’s affected by Brexit

From medicine to spare parts, farmers across the country are starting to understand the intrinsic effects of Brexit on their operating systems. Managing director of Borough Market, Darren Henaghan, recently held a meeting with the traders in the market to discuss the affects:

“Virtually all of the traders have a relationship with Europe either as an importer or an exporter; even the ones that didn’t realize that they were connected to it. All of them are affected in some way, shape or form." 

"For example, a big farmer right in the heart of England, say in the Midlands, didn’t realize that the feed stocks the farm uses are imported either via or from the European Union. Added to that are the supplements they use — nuts and corn — are mainly imported from the EU. Also the medicine; the penicillin, the other treatments they use for the animals; almost all of them are produced in Germany. ... Those things are likely to be interrupted if there is a no deal with Brexit.” 

From a restaurant perspective, Monika Linton, co-owner and founder of the Spanish food company and tapas restaurant chain Brindisa, points out that produce coming from the EU, should Brexit take effect, will be a big issue. 

“The supply chain obviously depends on the product, but there is a limit to what any business can stockpile," says Linton, "We can only stockpile things that have a shelf life. So we imagine that the produce that we rely on for the restaurant that has a shelf life, that comes from outside Britain, will be in short supply if there is trouble at the border and there is delay at the border. There is a limit to what we can grow in England. Definitely, there will be certain companies that will probably find that they get really, really hammered for produce." 

In terms of the actual products themselves, Brindisa uses British growers for a number of products that might traditionally be considered Mediterranean products, such as  tomatoes or garlic. Linton predicts those growers will not have the capacity to fill the gap. 

”There is going to be so much demand," she says. "If there is going to be a delay at the border that it is going to be very hard to secure supplies even if they are not coming from abroad because I think certain growers will just run out of stock and I think they just won’t be able to meet the needs of the market.” 

Transportation conundrums to add to the challenges

Henaghan from Borough Market explains that simple imports from the EU are efficient now because there is a common rulebook, because there are no borders to trade. For example, anyone can get in a van, drive down to France, fill the van full of cheese and come back into the country. He notes that if that changes, there will need to be new systems in place.

“You are going to need an import agent," he says. "You are going to need tax compliance, all those other things that people outside the EU are very used to, however, here we are not. It also costs money. It is going to be much more difficult for those small producers to develop a critical mass that’s going to be worthwhile.”

Linton shares a similar sentiment regarding the disruption that could potentially occur on the road. “Some people are suggesting that there is going to be more of a backlog of lorries leaving the island. The whole cycle has to work really smoothly for the system to function. It is not just a one-way journey. Even if Europe is very keen to export to Britain, Britain might have problems with products going the other way, from the UK to Europe. Anything that delays the system adds costs. If the continent allows them to come over it might be one thing, but if they have problems going back, that is going to be another issue. 

"Wherever they are delays, it is going to add costs for the transporters, so the price will go up for everybody. Not only could you have the potential exchange rate drop in value for sterling if things going badly, you might have rising costs because everything takes longer.” 

On the plus side, Henaghan suggests that some of the issues around transportation and logistics also could lead to growth. “If you want to get into the growth industry, buy yourself some warehouse space near Dover and become an import agent. That’s going to be a big growth area if indeed we go to a no-deal situation.”

Brexit could severely affect small businesses 

From a market perspective, Henaghan explains his concerns for the small businesses that trade in the market. “It will be very difficult for the smaller micro-entities — for example, the businesses that have developed a business model where they go and they know the producers in the little tiny farms and they get their produce straight from the producers, bring it back to the UK and then sell it with very little intervention from the state,” he says.

Linton shares her views on how Brexit will affect niche industries, such as her own business. 

“I think the political scenarios are really building systems for bigger businesses than what we are. So if you are a bigger business, you will find a way of navigating the storm. If you are dealing with a specialty niche like we are, Spanish food is not as fundamental to everyone’s home life as parmesan is. So the diversity and the specialists like us are going to find it too much of a challenge to maintain the portfolio of foods that we have got. We will have to focus on the food that everybody wants, where we are going to get a bit of an economy of scale. The specialism in the food industry might find that it might be reducing what it does and what it offers because we just won’t be able to have small quantity imports.” 

Linton adds, “Before Spain became a member of the EU, it was very costly for me to ship because every supplier and every invoice has its own duty and so on. It just made it very difficult to put together small batches. That is truly one of the concerns for me is that we are going to go back to where we started out 30 years where the cost of shipping things is going to be too high, so we end up specializing less.

“It’s like a perfect combination of negatives. Where you’ve got the business rate, you’ve got landlords asking for loads of money, you’ve got the High Street kind of dying, so you have got no new customers. Then on top of all that, you have got all those Brexit scenarios. Somehow Sainsbury’s will find a way through it because they have got the resources. But the little shop on the corner might not. The specialty deli might not find the way through it. Or the only way through it might be to become more British and not have the headache of trying to rely on foreign shipping. We will see.” 

Losing talent, losing culture

One of the major factors predicted to affect businesses in the UK is staffing. Both Henaghan and Linton highlight their concerns regarding losing staff, which is more a case of actually losing talent and cultural diversity. 

“Staffing is a huge issue," Henaghan says. "There is almost a caricature made of people in the food industry that people from the EU are almost like cheap labour from abroad. It is not. It is talent. What we are importing is talent. We are bringing skills in and then that helps the broader food scene and the broader population through sharing of those skills.

“People who have already made the choice to move to the UK have already proven that they are mobile. They have already taken a 20 per cent hit on their pay because of the exchange rate, if they are in the Euro zone. There might just come a point where they say, 'You know what, I can get an easier life in Spain; I can get an easier life in France. Come on, get the kids out of school, let’s go and do something there.' ”

Linton says that since the Brexit vote two years ago, they have had fewer CVs of non-British residents coming into the store, in both the wholesale business and the restaurant business. “It’s like a tipping point isn’t it, when you are sort of thinking, well what shall I do with my life? Maybe I’ll go back to Spain. Maybe I won’t go back to Spain. Brexit is just one of those things that makes it tip in a certain direction. You think well, the economy in Spain is actually doing quite well. The economy in Britain is not going to do well. I’ll probably go home.

“Then there are those that have been here for a longer time and have their mortgages, they’ve got their partners, and they have got their kids in schools. When you have got your roots actually here, and you’ve got all that sorted out, you really don’t want to go.”

Linton adds, “The biggest issue we face is that if people do go, how do we replace them, particularly in hospitality and in restaurants because that is much more of an intermittent type of work. People come here for short term to learn the language, to get away from their country and get a change of scene, learn new skills, etc. Those are going to be the kind of recruits that are going to be harder for us, because they are low-skilled. They are entry-level salaries.” 

Linton also points out that it is not just the actual labour that the UK is potentially facing a drop in, but all the goods that come with cultural diversity from other countries. 

“Hospitality is much more friendly and open than in Britain," she says. "For example, the Mediterranean is famous for its hospitality, and Northern Europe is not necessarily famous in the same way. So we will lose that cultural edge that they have lent us and that have inspired us all these years. For example, we are a Spanish business, with Spanish food. It’s a British company but with Spanish food, so we want to have and learn from Spanish people who know about their food. So that authenticity might be threatened.”

That cultural edge also applies to how Britain has evolved over the years into a multi-cultural tapestry of European cuisines. 

“The culture of food in Europe is historically much stronger than in Britain," Linton says. "Britain has obviously changed over the decades, but it has changed really thanks to being a member of the EU where this freedom of movement has allowed us all to learn from each other, so I think that will be an issue for us. A lot of the skills that we have, whether it’s cheese mongering, carving hams properly, looking after and understanding other ingredients like olive oil. All that is part and parcel of Mediterranean cultures, and a lot of the continental countries value and understand those products really well. Whereas here we understand our apples and our bacon and the stuff we have always lived with, we need to keep learning from our neighbours about the foods that we have now got used to using in our cooking.”

Uncertainty is the biggest challenge of all 

Talking about Brexit is like talking about the British weather. The continued uncertainty is at the crux of the issue for traders and businesses.

Henaghan emphasizes, “Uncertainty is the worst thing in the world when you are trying to run a business because you don’t know what you are trying to cope with, so you can’t price it and you can’t future-plan. This general drip of uncertainty affects businesses’ viability. We have had the thick end of two years now and everything being up in the air. And part of the proposal seems to be to have another period of uncertainty whilst we figure out what the rules are going to be going forward. And that isn’t helpful.”

Although the traders could work on preparing for new systems, the major issue is that no one really knows what lies ahead. Particularly for businesses, knowing the factors that will affect them is essential for planning business growth. 

Problem solving the uncertainty

Borough Market’s second language is French. They also have nine importers from Italy alone, people from all over Europe, as well as other parts of the world such as Turkey and Argentina. One of the reasons Borough Market has been able to enjoy such diversity is because there isn’t a border, Henaghan says.

“The fact that you can nip off to Burgundy, get some cheese and put it in your suitcase, or you can buy wine from France and Italy and just simply bring it back," he says. "If you take the Italians, they are very used to bringing stuff in, and getting their produce from the different parts of Italy and driving it over land. ... This is where the market is useful. People from Calabria talk to people from Puglia, talk to people from Piedmont. The solution from the traders here: is to work together better and to scale it up. They just need to know what the rules are so that they can plan."

With a hard border, Linton says: "You can’t plan with vulnerable produce like fruit and vegetables, or even fresh meats and cheeses."

And managing it could mean adapting menus to include less produce items from abroad.

In order to avoid that, what we are going to be doing with our menu planning is to make sure that we have got dishes that are not exclusively reliant on imported produce or stuff that might be in short supply," she says. "So we might find that we are going to have to have more brassica on the menu, or potato-based dishes, even though potatoes have gone way up in price, as well. We might have to engineer a little bit like that, or use more nuts, like chestnuts or products that are more high protein and you can store for longer. We have to find ways that we are not so reliant on shipping.”

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