Meat industry faces Brexit pressure

By Oscar Rousseau contact

- Last updated on GMT

Brexit is expected to have 'major implications' in the way the UK trades meat
Brexit is expected to have 'major implications' in the way the UK trades meat

Related tags: International trade, Uk

The UK meat industry is grappling with fears over what Britain's Brexit vote means as uncertainty prevails in the wake of the vote to leave the EU.

History was made today when the UK terminated its 43-year love-hate relationship with the EU. Final polling figures show Brexiters came away with a 51.9% majority but the move has thrown financial markets into meltdown as the pound fell to its lowest level since 1985.

Pork processor Danish Crown remained bullish on trade prospects, despite the result. “There is no doubt that Britain should continue to import food," ​said Soren Tinggaard, vice president of Danish Crown’s export department. "We know they appreciate our high quality, so we will continue to have significant sales to the UK market … Britons will also eat bacon in the future, and a considerable part of it will come from Danish Crown.”

Euromonitor International claims the result of the EU referendum will lead to a weakened currency, potential loss of access to the commonwealth market and tariff-free trade, which in turn may lead to a rise in food prices. It concluded that the UK’s dependence on foreign agriculture means Britain is “unprepared to feed its own people​”.

EU Referendum data

  • Vote Remain: 48.1%
  • Vote Leave: 51.9% 
  • 33.5m people voted altogether
  • Over 17m voted Leave

‘Major challenge’

Ready meals – of which 79.2% are meat-based in the UK, according to Kantar – are among a host of packaged food products that could see volume growth hit hard. Analysts expect processed meat and seafood to enjoy more growth than baked goods, ice cream, ready meals and confectionery.

The uncertainty that will overshadow the UK for at least the next two years is one of the major challenges for business,​” said Sarah Boumphrey, global lead, Economies and Consumers at Euromonitor International.

This will undoubtedly damage business sentiment, put downwards pressure on investment and affect consumer confidence. There will be a direct impact on sterling, and this could push up inflation. So depending on the cost base of the business this could also have a negative impact – although for UK exporters a weak currency is a boon.​”

Peter Hardwick, head of exports at UK levy board at AHDB, agreed and said meat exports in the short-term would be more competitive thanks to the depreciation of the pound. And there is a modicum of good news for the UK meat industry – that a weak currency could herald a boom in exports, similar to the growth seen in Brazil​ following a depreciation of the real.

ThinkstockPhotos-512701524
UK meat producers could make quick profits by capitalising on the drop in the pound's value

Jean-Pierre Garnier, head of exports at AHDB Beef & Lamb, said the result could impact the UK's global meat trade. "The referendum which has resulted in a vote to leave the EU may, in some cases, have implications in the way we trade meat not only within the European Union but also with Third Countries as most, if not all, Export Health Certificates and trade agreements have an EU dimension. 

"The extent to which this may be the case will only become apparent as the details of the negotiations become clear over the next two years. We will review developments over the coming weeks and months and ensure that meat exporters are kept totally aware of all measures that may affect their business following this significant event​."

Market access ‘crucial’

Liz Murphy, CEO of the International Meat Trade Association (IMTA), said the industry now requires stability and continued market access.

IMTA represents British importers and exporters of beef, pork, lamb and poultry meat and have a combined turnover of more than £4bn representing direct employment of over 15,000 people.

Around 45% of meat and meat products are imported. Industry and UK consumers expect access to high quality meat products, and require stability and a continued supply from all sources including the EU. This is crucial in order to keep the nation fed, to ensure continued access to supplies for the retail, foodservice, manufacturing and wholesale sectors.​”

Just under a quarter of British meat is exported and Murphy said it is “critical​” for the meat sector to have continued access to markets in Europe.

What can businesses do in the face of volatility?

The challenge is the length of the negotiations and that we are entering into unchartered territory – this makes it very difficult to implement effective strategies,​” said Sarah Boumphrey at Euromonitor. 
There is an uncertain future for the UK economy for the next two years at least and there are flow-on effects to Europe as a whole… I think taking a cautious approach to investment decisions would be wise until the dust settles and we see the likely direction of the negotiations.​”

Tariff tribulation

One issue that may cause concern for the meat industry is what happens to free trade now. Currently, meat and livestock can be traded freely across the EU with no import tariffs charged.

But once UK Prime Minister David Cameron activates Article 50 of the Lisbon Treaty, Britain will be on two-year conveyor belt leading to an exit from Europe. If no agreement is reached, or an extension on negotiations is not made, Britain is expected to revert to World Trade Organisation rules, meaning tariffs will be in place for all exports to the EU.

The meat industry has warned of “uncertainty​” and “downward pressure​” following the result. A GlobalMeatNews​ survey​ conducted before the referendum found that 87% of respondents felt Brexit would disrupt trade. 

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