The Eurozone debt crisis is starting to bite into UK food exports to mainland Europe, The Grocer has learned.
Figures supplied by the Food and Drink Federation revealed September exports were unchanged yearon- year, bringing to an end an eight-month run of high growth rates averaging 14%.
“There has been a slowdown in the food and drink exported in September, mainly caused by lower EU growth,” confirmed an FDF spokeswoman.
Exporters to the Eurozone face a double whammy of lower levels of consumption on the Continent and increasingly unfavourable exchange rates. Reduced confidence in the single currency caused by the worsening debt crisis in the Eurozone has dragged down the value of the euro from about 90p in July to 85p today – making UK food products more expensive to buyers in mainland Europe.
“Clearly the pound strengthening against the euro isn’t helpful for UK companies,” said Trefor Griffith, head of food & beverage at Grant Thornton.
British companies were likely to face tougher competition in the future, Griffith added. “A number of Eurozone countries see their food sectors as a way to improve their predicament – that means the level of competition for UK businesses is increasing.”
The Irish government, for example, set a target last year to increase food and drink exports by 40% by 2020.
Some exporters have already started to shift their focus away from Europe. “Companies have commented that they are not investing as heavily in Europe in the near future,” said Elsa Fairbanks, director of the Food and Drink Export Association. “Given the economic climate, they are instead focusing on regions such as Asia and the Middle East.”
Nick Short, acting managing director at food exporter Trevor Rose, said the company was shifting its focus to countries in Asia Pacific and Africa, where growth prospects were better. In addition to the poorer trading prospects in Europe, credit insurance premiums – which cover against non- payment by customers – were becoming more costly in the Eurozone, Short added. Although premiums varied widely, double-digit increases were becoming the norm, he claimed.
The prospect of retailers and distributors failing on the Continent is also a concern – and not just for insurance companies. As Short asked: “What would happen if a major multiple went down in Europe?”
Another scenario exporters are starting to think about is the break-up of the euro. Trevor Rose had already decided to invoice in sterling if that occurred, said Short.
Rahul Kale, director of international business at Typhoo, suggested an alternative scenario. “I can see companies switching to the US dollar as a neutral currency if trading in euros becomes difficult or uncertain,” he said.
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