Food and drink businesses could start scaling down UK operations next year unless the government gives clarity over a post-Brexit transition period, the FDF has suggested.
In written evidence to the Business, Energy and Industrial Strategy Committee ahead of its hearing on Brexit tomorrow, the FDF said it was “aware that some food and drink companies are preparing to make serious decisions at the start of 2018 which could have detrimental consequences for jobs and investment in the UK”.
It urged the UK government to provide “early confirmation” that there would be a post-Brexit transition period and that “no substantive changes will be required on day one after we leave the EU” to reassure businesses they would not face “cliff-edge” changes in March 2019.
“Until a comprehensive UK-EU trade deal has been agreed, ratified and enters into force, we will need transitional arrangements to ensure businesses have continued access to vital imported ingredients and export markets,” it said.
“Precise details of the UK’s future customs model must be negotiated and agreed with the EU and specifications confirmed to industry by HMRC, in conjunction with requirements agreed with the other frontier authorities.”
Noting that the “overwhelming majority of UK trade” in food and soft drink is with the EU, the FDF said the government must prioritise putting in place “customs arrangements that are as frictionless as possible” to avoid disruptions to supply chains.
“Just in time’ supply chains mean empty shelves in four days or fewer if supply is delayed or interrupted. Most food has a limited shelf life and some is highly perishable,” it said.
If UK food and drink exported to the EU were suddenly subject to the same physical checks as products from third countries, it would add “significant logistical challenges and costs” that would ultimately be passed to consumers and could lead to shortages in supermarkets, it added.
The FDF’s position was echoed by Ferrero UK, which said the transition period should last for “as long as it takes to get the future trading relationship with the EU right” in its submission to the committee.
A return to WTO rules would add about 10% to the cost of its UK products, which are manufactured in Ireland, France, Belgium, Germany, Poland and Italy, Ferrero said. This would “in all likelihood” lead to higher consumer prices for its brands like Thorntons and Tic Tac, it added.
However, “non-tariff barriers” like customs arrangements and regulatory compliance were of even “greater significance” to Ferrero.
It expressed concerns over whether over whether proposals to increase capacity at Dover were “adequate” and warned there would be a “risk of stock shortages in the event of severe delays.”
The company urged the UK government to explore a regulatory co-operation relationship with the EU, warning sudden changes to food law and labelling would “increase the complexity” of its business model, potentially increasing costs and reducing consumer choice.
The FDF also noted that “full regulatory equivalence” between the UK and EU “would go a long way towards ensuring that trade can be conducted much as it is today”.
Both the FDF and Ferrero raised the uncertainty around border arrangements with the Republic of Ireland as a key concern, with Ferrero noting that 80% of the output from its Tic Tac factory in Ireland is exported to mainland Europe from the UK.
The FDF said it had offered to convene a joint industry-government taskforce to “tackle the specific border challenges for food and drink”, so that vital imports and exports of raw ingredients and finished goods were not “delayed or impeded”.
The BEIS Committee will hear oral evidence from the FDF, the PTF, Nestlé and Diageo on the implications of Brexit for the food and drink processing industry tomorrow.
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