UK Food Retailers Say No-Deal Brexit Will Bring Higher Prices, Shortages

By John Saulnier, FFB Editorial Director

190131 brexit graphic02Will they stay or will they go? With the Brexit debate droning on and on, all that is clear among many members of Parliament in Westminster is that they just don’t know – even though it has been more than two years since a narrow majority of voters (51.9% to 48.1%) opted to leave the EU in a special referendum. So, with the March 29 deadline clock ticking ever more loudly, Prime Minister Theresa May is off to Brussels yet again to resume negotiations and try to reach settlement terms for a UK-EU divorce she didn’t favor in the first place.

As the politics plays out on both side of the English Channel and beyond, the food industry is preparing for the worst in the event the UK crashes out of the customs union without a tariff deal, thus leaving importers and exporters to trade under WTO rules. Frozen food companies have been stockpiling inventory for some time now, and at this point available cold storage space in Britain is reportedly all but impossible to find. Indeed, it’s so bad that Greencore is even considering airlifting certain ingredients to the United Kingdom needed to make sandwiches – as long as its retail supermarket buyers chip in to help pay for the freight. Good luck with that!

It’s hard to imagine that folks in the UK will not be able to make sandwiches, with or without produce from the continent – even if it means eating BLTs without the lettuce for a while. Then again, a scarcity of cucumbers could spiral into a national crisis.

“We have begun stocking up on a small amount of certain products in the event of a no-deal, such as frozen prawns and tomato paste,” a Greencore spokesman told The Sun newspaper in an article published on January 29.

Last time I checked, much of the frozen prawn tonnage consumed in Europe and the UK does not originate in EU, but rather is imported from suppliers in Asia and South America. In other words, it’s sourced from countries where WTO rules already apply.

190131 brexit graphic03In the lead up to Brexit, Trowbridge, Wiltshire, England-based Apetito, a major supplier of frozen and refrigerated food to the health and social care sector in the United Kingdom and subsidiary of Rheine, Germany-headquartered Apetito AG, has invested £5 million in planning and preparation ahead of what could be a “no-deal” Brexit scenario, as previously reported by FrozenFoodBiz.com. It has significantly increased stocks of “high risk” raw materials and finished goods to make value-added products that range from cottage pie and roast chicken to curries, fish dishes and vegetarian items.

Meanwhile, some member of the British political class insist that their counterparts on the continent will make concessions in the end, since they regard the UK as a “treasure island” market for its manufacturers of cars, chocolate, champagne and other desirable products. Others, particularly those in the Remain faction, are not so sure that Jean-Claude Juncker of Luxembourg and like minded members of the European Commission from Germany, France and elsewhere will be keen on granting favorable terms to a departing member of the club.

A number of the UK’s leading retail grocery chain and foodservice executives, concerned that a “significant disruption” in the nation’s food distribution and manufacturing sectors is on the cards should a hard no-deal Brexit come about, have urged members of Parliament to “urgently find a solution” for what they believe is an unnecessary problem. In a jointly signed letter from the British Retail Consortium, chief executives of Sainsbury’s, Marks & Spencer, Asda, Waitrose, KFC, McDonald’s and other companies have warned that their prices would likely rise without a deal, since nearly one-third of food eaten by Brits is supplied by EU countries whose exports would be subject to tariffs.

Here are excerpts from the January 28 letter:

190131 brexit graphic01"This complex, 'just in time' supply chain will be significantly disrupted in the event of no deal. Even if the UK government does not undertake checks on products at the border, there will still be major disruption at Calais as the French government has said it will enforce sanitary and customs checks on exports from the EU, which will lead to long delays; Government data suggest freight trade between Calais and Dover may reduce by 87% against current levels as a result. For consumers, this will reduce the availability and shelf life of many products in our stores.

"As prudent businesses we are stockpiling where possible, but all frozen and chilled storage is already being used and there is very little general warehousing space available in the UK. Even if there were more space it is impossible to stockpile fresh produce, such as salad leaves and fresh fruit. Retailers typically store no more than two weeks' inventory and it becomes difficult to restock stores if the supply chain is disrupted. We are also attempting to find alternative supply routes but there are limited options and not enough ferries, so this could only replace a fraction of the current capacity.

"We are extremely concerned that our customers will be among the first to experience the realities of a no-deal Brexit. We anticipate significant risks to maintaining the choice, quality and durability of food that our customers have come to expect in our stores, and there will be inevitable pressure on food prices from higher transport costs, currency devaluation and tariffs."

Meanwhile, based on results of a survey conducted by the KMPG auditing organization, many British firms are “praying for an extension” of Article 50 of the Treaty of Lisbon which gives EU member states the right to quit unilaterally and outlines the procedure for doing so. But this will just delay the inevitable, won’t it? Or will it give anti-Brexiteers time to mount a second referendum effort. Assuming this eventually happens, and the Remainers win, then what? Will Britain’s fate ultimately be decided in a two out of three final ballot?

Strangely fanciful times we live in these days, especially considering that the unwilling party to the divorce in Brussels continues to adamantly insist that “the withdrawal agreement is not open for renegotiation.”

It was easy to say “I do, I do” way back when. Now, with apparently half of the country saying “I don’t, I don’t” want to finalize the divorce, those with cold feet will still have enough to eat, though it could cost more to get into the door. One supposes that Brexiteers would tell their Remainer countrymen that freedom is not free.