Stuart Allan

Is the Brexit result leaving a sour taste in food manufacturers’ mouths?
The UK is coming to terms with the results of the Brexit referendum and the country waits to see whether the ‘remainers’ predictions of decades of financial doom and gloom will come to fruition, or the ‘leavers’ were right when they said things could only get better. Stuart Allan, food entrepreneur-turned certified business coach, looks at the effects leaving Europe is having on the food industry and what food manufacturers can be doing now to plan for the future.

According to the industry body, the Food and Drink Federation, food and drink is the single most important player in UK manufacturing. It accounts for one-sixth of manufacturing activity and employs around 400,000 people across 6,620 businesses. It estimates that the sector’s total contribution to the economy, in terms of Gross Value Added, is £21.9bn which, it argues, is almost equal to the combined contribution of the automotive and aerospace sectors.

There is no doubt that UK food and drink manufacturers have been exceptional in the growth of UK productivity in recent years; an increase of 11% over the past five years compared to a cross-sector figure of 0.5% should have given everyone an air of quiet confidence; instead, because of Brexit, we find ourselves feeling nervous, if not downright worried, about the future.

But are we worrying unnecessarily? Firstly, let’s look at the facts. This is a completely unprecedented event. There has been a significant amount of scaremongering, and it is crucial that business leaders remain calm and analyse the market in order to take advantage of opportunities. Since its inception, no-one has left the EU, and certainly no-one of the market-force and calibre of the UK, so everything and anything is speculation at the moment. That’s not to say; we can’t take note of predictions and prepare for their possible effects. This is not the time to sit on our laurels, waiting to see what will happen; we need to be proactive, and we need to have a plan. Let’s have a look at just a few of the areas that will be affected by our departure.

Staff
In 2014, 95,351 (26.9%) of the industry’s employees were of non-UK EU nationality1. In 2016, it is probably closer to 40%. In 2014, it was estimated 109,000 new recruits would be needed by 20222 to meet the skills needs of the sector, although this figure may not apply to a Brexit industry. Whilst the future of EU migrant workers remains unsure, it is very difficult to gauge future staffing needs or to plan for skills shortages. As things stand at the moment, we know we have two years from when Article 50 is invoked, and that is likely to be next year. 2017 will also see French and German elections, leading to more uncertainty for the future of the European Union. But let’s not worry about the ‘what ifs’; we’ll concentrate on what we know. We know that nothing is realistically going to change until at least 2020, we know that much of the EU migrant workforce is settled in the UK, married with families, having arrived over the previous 10 years. It is unreasonable to expect them to leave. Whether there will be restrictions on further immigration will be a parliamentary decision, but our country’s immigration history demonstrates a historical recognition of the need for a relatively small island to seek a labour force from overseas. From an HR perspective, close monitoring of personnel numbers and Government announcements is prudent. No one can afford to employ additional staff for a ‘maybe’ scenario, but it may be worth researching the viability of employing some apprentices; they won’t cost a fortune, and would allow you to have a ‘skills bank’.

Imports
In 2015, the UK imported £24.6bn of its food and non-alcoholic drink from the EU and £10.5bn from non-EU countries.1 The UK depends on the EU for approximately one-quarter of its food, but only 4% from North America according to the UK Department for Environment, Food & Rural Affairs. The effect of Brexit on the value of sterling is the key factor to the import concerns, and no-one can be sure how that will go. In an ideal world, we will become more self-sufficient, producing and manufacturing for consumption at home, which will have the added bonus of a positive effect on the environment, with reduced transportation. From a manufacturing perspective, plan ahead, look at the global commodities market. Purchase from one supplier where possible, even if you’re a small company, or perhaps look at group buying initiatives.

Exports
My advice would be to stop dithering and waiting to see what is going to happen. There is a huge opportunity for UK food manufacturers with the potential removal of trade barriers. Get proactive, go to international trade shows, look for agents who have a portfolio of similar products to yours, approach and cultivate international companies, and speak to logistics companies to establish contacts and create opportunities.

Be very targeted and conduct market research, the internet is your friend, don’t try to tackle the whole world at the same time; look at buying habits, what flavours are popular, countries’ wealth and demographics. Take your product portfolio and start touting it. Remember that British food has a premium attached to it. Our production standards and accreditations are now worldwide benchmarks so you can feel confident when you are selling your produce that buyers will be receptive. Don’t fuss about your branding too much, so many companies make that mistake; spending too much money before getting customer interest and then finding themselves supplying to a customer who wants their own brand ideas implemented.

Next Steps
Instead of worrying whether Brexit is going to leave the British Food Industry floundering, take a positive stance, communicate that positivity to your workforce and start planning for the future. Embrace change and take this opportunity to look at your business with fresh eyes. What can you do to improve productivity, what markets are you missing out on, where can you improve your profit margins? The world is a big place, and we’re a small island, but it is also an accessible marketplace; know where you want to go and plan your journey to global success and be realistic on the timescales involved.

http://www.fdf.org.uk/eu-referendum-food-drink-statistics.aspx
http://www.fdf.org.uk/statsataglance.aspx
To find out more, contact Stuart on 01206 523394 or visit www.stuart-allan.co.uk