As if Brexit were not enough, food & drink now finds itself having to face up to the impact of a snap general election on 8 June. Here are the key issues for the industry now, and the two main parties’ positions on them.
Can the next government stop business falling off that cliff edge?
The spectre of EU food tariffs sending shop prices soaring was a source of furious rows in the EU referendum campaign. With the latest Nielsen figures showing fresh food inflation of 1% year on year in April, up from 0.9% the previous month, there are signs a long-feared inflationary period for supermarket prices has dawned. The BRC claims shoppers face an average EU tariff on food of 22% if Theresa May fails to reach a trade deal with Brussels before Britain’s exit. It forecasts possible tariffs as high as 21% for tomatoes and up to a whopping 46% for cheese.
When almost 80% of British food imports come from EU states, sectors including beverages, fruit, veg and meat are hugely exposed.
The FDF, in its election manifesto this week, sets out securing a “zero tariff trade” deal as a key priority, calling for “a bold and ambitious free trade agreement with the EU”, one that includes “a seamless, frictionless border for Ireland”. After a crisis meeting in February, no fewer than 35 food & drink bodies warned the government of “significant economic damage” unless it secured a free trade deal with the Republic.
Sadly, it looks as if whoever wins the election could be locked in months, if not years, of talks with the EU before our fate on tariffs is known.
According to reports from the early skirmishes in negotiations, talks with EU leaders and PM May have been anything but “frictionless”. One supplier source laments: “Business can ill afford to be waiting two years to find out if it’s going to be going over a cliff or not.”
This week a report by the House of Lords EU energy and environment sub-committee warned leaving the single market and the customs union would cause “significant uncertainty” for the entire UK agri-food sector. “If the UK leaves the EU without agreeing a comprehensive UK-EU free trade-agreement, or a form of transitional arrangement, UK-EU trade would have to proceed according to WTO rules.
“Many of our agricultural producers, and our food manufacturers, would incur substantial costs associated with tariff and non-tariff barriers when exporting to the EU, with sectors such as pig and sheep meat at particular risk.”
Labour has tried to differentiate itself on tariffs, declaring it will see “continued tariff-free trade between the UK and the EU, no new non-tariff burdens for business, regulatory alignment and continued competitiveness for goods and services” whether through a reformed single market or customs union.
What reassurances will the parties give to safeguard the food & drink industry’s massive EU national workforce?
Theresa May has been accused of using EU nationals in the UK as “bargaining chips” with Brussels as she negotiates the UK’s exit.
But while shadow Brexit secretary Sir Keir Starmer says Labour would rip up the Great Repeal Bill and replace it with an EU Rights and Protections Bill to ensure workers’ rights are not destroyed, he admits freedom of movement would end under Labour just as it would under the Tories.
At the same time the Tories too have been keen to stress there would be “no cliff-edge” change in migration policy post-Brexit under them. It says that business and industry will be consulted this summer.
The Lords committee warned this week there was an “extensive” reliance on EU labour in food and drink for both permanent and seasonal labour ranging from skilled professionals such as vets to abattoir workers and vegetable pickers, without whom the industry would face “severe difficulties”.
Can any party fix the “defunct” business rates system?
The Tories were humiliatingly forced to bail out cash-strapped local business with a £300m relief fund in the Budget, ahead of the latest business rates revaluation in April - an emergency measure, which, they insist, will not be delayed by the election.
Retailers will pay an additional £2bn over the next three years compared with the last three after the revaluation.
The issue of rates and, more widely, a level playing field between small retailers, the big supermarkets and a new breed of online companies that appear to be getting away lightly is a potentially divisive issue for the food & drink industry. Not only did the big four supermarkets - Tesco, Asda, Sainsbury’s and Morrisons - see a 5.9% reduction in rateable value, but online giants such as Amazon and Asos also benefited from the changes.
Analysis by experts CVS in January showed that the nine Amazon distribution centres in England and Wales would benefit from a £148,000 reduction in property tax, while the average small shop was being hit by an extra £3,663 on its rates.
Labour’s shadow business secretary, Rebecca Long-Bailey, describes the unfairness as “madness” and calls rates a “ticking time bomb” for small businesses. “It cannot be right for smaller, town centre retailers to be facing massive hikes while the Amazons and Asos’s of this world have their business rates cut,” she says. But communities secretary Sajid Javid describes the issue of levelling the playing field as “not the highest priority issue at the moment”.
Will the next PM come armed with more health taxes?
One of the last major acts of MPs before the dissolution of parliament was to join forces to rush through the controversial soft drinks sugar levy in an abbreviated version of the Finance Bill.
With The Grocer revealing last month the tax could hit Coca-Cola’s full sugar drink alone with a £200m bill, there was frenzied speculation the tax might be shelved or even axed altogether as part of a clearout of old Cameron policies and to show that Theresa May wanted to be more business friendly, especially when it comes to policies seen as regressive taxation. But financial secretary to the Treasury Jane Ellison says the levy, which comes into force in April 2018, remains the Conservatives’ “flagship” obesity plan. However, the Tories have rejected calls by the SNP to add high-sugar dairy drinks to products targeted, although promised to review this in 2020.
Labour, which slammed the Childhood Obesity Plan last year as “weak and watered down”, have promised a new much tougher obesity plan in the first 100 days of a Labour government. They have already revealed plans to extend restrictions on junk food advertising to all programme on TV before the 9pm watershed.
The party, promising to make the next generation the “healthiest the world has ever seen” if it came to power, would be ban ads promoting food from high in fat, salt or sugar being broadcast during primetime television, such as the X Factor, Hollyoaks and Britain’s Got Talent.
Labour previously mooted plans for such a ban under then shadow heath secretary Andy Burnham, before the 2015 election, but they were dropped from its final manifesto as Labour ditched a raft of policies for being too “anti-business”, not something Corbyn seems to be worried about.
Former PM David Cameron is also believed to have considered extending the watershed ban, before the Tories watered down his childhood obesity plans last year, with Public health England having called for “significantly reduced opportunities to market and advertise high sugar food and drink products” across all media, as part of its priorities for fighting obesity.
PHE is already carrying out a review of the Nutrient Profile Model used for the ban on advertising during programmes aimed specifically at children, with existing Ofcom regulation dating back to 2007.
But Labour also says it would go further on taxation. It has called for the soft drinks tax tax to be broadened to cover multi-buy discounts on HFSS foods, sparking outcry from the FDF, which accused Labour of putting “taxation on heath above jobs.”
FDF director general Ian Wright calls for a “partnership approach” with the next government, claiming extended sugar taxes to other parts of the industry would, following Nestles move to switch more than 300 jobs to Poland, risks similar moves to the likes of Mondelez and Ferrero, whose chocolate products are possible targets for any next stage of the levy.
“You have to ask are these Labour MPS more interested in passing health taxes than about losing jobs in the UK,” he warns.
“The dice is already loaded against UK investment because of Brexit without throwing in other bits.”
Would a Labour government inevitably mean more taxes?
Labour has made no secret of its plans to hit big business with more taxation should it come to power. Shadow chief secretary to the Treasury Peter Dowd said the last Budget had “continued the government’s programme of tax cuts for multinational corporations and the super-rich”.
Labour says it would raise corporation tax for big firms, after it was slashed under the Tories from 28% to 17% by 2020.
As it seeks to put the onus on domestic policies and appeal to workers, Labour has also promised to raise the legal minimum wage for all to at least £10 an hour by 2020, giving more than five and a half million people a pay rise in the process.
ACS chief executive James Lowman says: “We do not believe the minimum wage and living wage rates should be used as a bargaining tool to gain votes at the expense of hard working entrepreneurs and community businesses.”
Still, few in the food & drink sector are overly concerned with the idea of a Labour government. As one retail source puts it: “I think the more interesting thing is just how big the Tory majority will be and whether there is going to be any Lib Dem bounceback.”
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