What hard Brexit could mean for the F&D sector

So it looks like the UK is heading for a hard Brexit. The Prime Minister has made it clear that Britain would leave the Single Market which does, at least, provide some clarity for British food and drink (F&D) companies which import and export across the EU.

The prospect of Brexit has undoubtedly had an initial impact on the confidence of the UK’s F&D sector. The fall in the value of Sterling and the prospect of future trade barriers between Britain and remaining EU member states are all major concerns for a sector which relies so heavily on importing and exporting. What then might a hard Brexit mean for the future of UK F&D?

On the bright side, British Ministers are already talking to a number of non-EU countries about securing separate trade agreements which, if successful, could potentially more than compensate for any restrictions on EU trade. If you look at the growing level of UK F&D exports to China, up by 62 per cent to £258 million and the fact that the US currently accounts for £456 million worth of imported goods a year, shows the potential of growing non-EU foreign trade within the sector.

Growing these markets is, however, likely to take time. In the interim period, Brexit could cause British growth to stagger. As Article 50 is triggered the UK might see more economic turbulence causing concerns about both imports and exports. As Brexit negotiations continue it’s possible the UK may see a decline in investment, which could put a dampener on F&D sector growth. Of even greater concern for many British businesses, in the next 12 months there’s also potential of a significant fall in the number of European workers that move to the UK to fill jobs within the sectors.

For F&D businesses with established markets in Europe, there are also concerns about future political events in the year ahead. The outcome of this year’s French and German elections could have an impact on economic stability across Europe should voters there also opt to go in an anti-EU direction.

At present current downward fluctuations in the Pound are providing an opportunity for UK F&D businesses to grow markets within the EU and throughout the globe. Much of Britain’s F&D’s offering is regarded as high quality so there is a real prospect to generate further growth, especially as the value of Sterling continues to remain low.

The longer term future for the sector will be determined by both the success of Brexit and wider international trade negotiations as well as forthcoming political events across the continent.

While the UK F&D sector should start to see a clearer picture of the economic landscape emerge after Article 50 is triggered in March, the important questions around access to overseas employees, the potential of new EU import tariffs and a prospect of other existing global barriers coming down will ultimately determine how the sector will progress in the longer term.

Greg Smith, Head of Trading at foreign exchange specialists Global Reach Partners