Greek embassy’s economic and trade affairs office: The impact of Brexit on food industry

Scotch whiskey is the largest contributor in net exports from the UK, totaling 3.95 billion pounds, the Greek embassy’s economic and trade affairs office said in a report on measuring the impact of Brexit on the UK food production sector.

Food production accounts for 16 pct of manufacturing production in the UK (2014 figures). The sector, including agriculture, manufacturing and wholesale/retail sales and distribution, employs 3.9 million workers (2015 figures), or 14 pct of national employment, while the food sector contributed 108.8 billion pounds (7.3 pct) to national Gross Added Value in 2014.

The food/beverage industry exported products worth 18 billion pounds, of which 3.95 billion pounds were exports of Scotch whiskey.

In 2015, food prices fell by 1.7 pct in real terms, after a five-year period during which prices were rising more than the average inflation rate. On average around 11 pct of household spending in the UK were on food, or 198 billion pounds annually. Gross Added Value in the food sector (excluding agriculture) grew 5.7 pct in 2014, after a 5.5 pct increase in 2013.

Gross added value of the food wholesale sector grew 16.6 pct, of the distribution sector by 6.5 pct, of the retail sector by 4.0 pct and of the production sector by 2.5 pct.

The embassy report stressed it was important to underline the significance of the EU as a trade partner of the UK in food and alcohol. The UK produces only 54 pct of its food consumption and needs another 27 pct on imports from teh EU to cover its consumer needs. Therefore, the EU represents more than half of imported food in the UK and buys 70 pct of exported food and farm products from the UK. If trade deals of the UK were to be abolished because of the Brexit, this could signal the ominous start in a long and winding process of negotiations until new trade deals were reached and enterprises were able to improve their supply chain.

Additionally, a devaluation of the pound sterling combined with low flexibility of imported food were leading to estimates that the value of imports (and food prices in the UK) were most likely to rise in the short-term.

In the medium-term, prices are expected to increase, if the UK imposed duties on EU imports. Employment in the food sector is expected to be negatively affected, while consumers could benefit from lower prices in the longer-term as the high cost of imported products in the EU will be replaced by cheaper food imports from developing countries.

Possible limitation in the free movement of citizens in the UK after Brexit are expected to have negative impact on the labor market in the food industry. At present, around 38 pct of workers in the UK food industry are foreigners and 65 pct in the agriculture sector are EU citizens.