Britain votes to leave the EU: What now?

Photo: iStock

Britain has voted to leave the European Union and Prime Minister David Cameron has resigned as a result. Across Europe and the UK, the food industry is coming to terms with the outcome.

Yesterday the value of the pound had begun to rise as City traders were confident of a Remain vote. But as 17.4 million people backed Brexit, the pound plummeted today to its lowest level since 1985 and the FTSE 100 index took a hit falling by more than 8% - the biggest slump since 2008 - when trading began before recovering slightly by mid-morning.

Brexit - the stats
  • 51.9% voted to leave
  • 48.1% voted to remain
  • 72% turnout
  • 17.4 million people voted in favour of Brexit
  • Prime Minister David Cameron has resigned

The British and European food industry had overwhelmingly been against Brexit, fearful of taking a leap into the economic unknown.

So what does Brexit mean for industry?

According to Euromonitor International, UK confectionery, ready meals and sweet and savoury snacks will be the most affected packaged food sectors

in terms of volume growth. But the impact will not only be felt in Britain. The UK is the EU’s second biggest economy behind Germany, contributing 35% of the EU’s economic growth between 2010 and 2015 and outperforming the other large economies.

The industry view

Director general of the UK’s Food and Drink Federation (FDF), Ian Wright, expressed disappointment - an internal poll had shown 70% of FDF members were against Brexit- but said it would work with the government to secure the best outcome for the British food industry.

Europe-wide industry group FoodDrinkEurope (FDE) called the result was a blow that will have repercussions across all member states of the EU. Its focus was on damage limitation.

“European authorities and national governments must now take the necessary steps to reinforce the Union,” a spokesperson said. “The EU must learn from this experience and not allow for further weakening of the EU in today’s particularly challenging context. 

Despite sending an open letter to its some 800 employees detailing the reasons why it was pro-Brexit, Tate & Lyle Sugars vice president, Gerald Mason, declined to comment on the result saying it was a sensitive time for many people in the UK. ”For now we've decided not to talk about our sugar refinery as there are many more significant issues for people here in the UK,” he said.

Other firms said they would be doing what they could to protect business interests. A spokesperson for Danone told FoodNavigator: “The UK is a key market for Danone – one of our top ten – and we have one plant there with around 1,200 employees working there. We are committed to our business there.

“Our objective is to mitigate the effects through our usual hedging policy and we will continue to monitor the impact. It’s too early to quantify the impact [in terms of trade tariffs and prices] but what I can say is that our objective is to put in place the instruments needed to remain competitive.”

A spokesperson for Cargill said the company would be looking to protect its business amid the Brexit fallout. “While Cargill believed that there were

distinct advantages for the UK and member countries to remain together as part of the member of the European Union, the priority now is to closely monitor the situation and ensure that our business interests are protected during the coming months, as the situation unfolds.”

Peter Giørtz-Carlsen, head of Europe at Arla Foods, said he was disappointed by the outcome. “We will work with the UK government and other relevant stakeholders to maintain [the continued free movement of goods, services, people and finances] in so far as we are able to, in the post-Brexit environment.”

The view on EU/UK trade: ‘Planning will be very difficult - if not impossible’

According to Eversheds law firm For businesses in the UK who import from or export to the EU or are part of an EU corporate group this uncertainty means that planning is very difficult if not impossible. Businesses should look at the various models and work out the implications of those models.”

According to law firm Eversheds, trade deals are very hard to negotiate and it would be “a remarkable feat” if the UK and EU manage to achieve one within the next two years.

It said that if no trade deal is agreed within the relevant time frame, the UK and the EU will trade under the terms of the World Trade Organisation (WTO).

“This would mean that the EU would be obliged to impose its Common External Tariff on UK imports and the UK would be free to impose import tariffs on goods entering the UK (from the EU and elsewhere). Goods would also be subject to custom barriers.”

The EU’s Common External Tariff varies from 0% on cotton, 11.5% on clothing, 25.6% on sugar and confectionery, to 45% on certain dairy products – “and goods exported to the EU would still need to comply with EU standards,” it added.

The small-scale producer’s view: ‘Independent food sector will be hit hard’

Legal expert and author of Artisan Food Law, Gerry Danby, did not mince his words. Brexit is a decision the UK will spend decades regretting.”

Danby had previously warned about the “somewhat ironic” situation that many artisan producers will find themselves in as their PDO and PGI British food products are protected within the EU but not their native UK.

“[But] the EU protected food name scheme is simply illustrative of the bigger picture,” he said.

“What nobody appears to have given any thought to is that the UK’s legal system has over the last 40 years become inextricably interwoven with that of the EU. A fundamental review of the UK legal system will be a huge technical challenge. Nowhere is this truer than in the case of food law – where around 98% is presently EU law.”

“The timescale within which this must be undertaken means most changes will have to be done under delegated powers and beyond proper parliamentary scrutiny, so much for democracy. We shall be living with an uncertain and chaotic mess for many years to come, which can only be bad for business, but particularly damaging for small scale food producers. We have a relatively young, not yet resilient independent food sector which will be hit hard.”

The retailers’ view: Prepare for significant swings

The British Retail Consortium (BRC) said it is important for the government to clearly communicate on the disengagement process. Without this clarity, retailers, other businesses and the economy at large would suffer.

“We are already seeing the commencement of a period of considerable volatility as financial markets react to any emerging information that might indicate how the new relationship to the EU might be shaped. Retailers should be prepared for the possibility of significant swings, particularly in the exchange rate and consumer confidence.”

The EU institutions' view: 'Unity as 27'

President of the European Parliament, Martin Schulz said this morning: “The line of the European Parliament is quite clear: we are very sad about the decision of the voters in the UK but it is a sovereign expression of the will of British voters to leave the EU. This is a difficult moment for both sides. We have now from a legal and procedural point of view to assess what are the necessary next steps.

The Parliament will meet on Tuesday to adopt a resolution assessing the outcome of the vote and to describe “the necessary next steps,” he added.

President of the Council, Donald Tusk, said it was a historic moment but not one for hysterical reactions, and called for unity in the wake of the UK’s exit.

“Today, on behalf of the twenty seven leaders I can say that we are determined to keep our unity as twenty seven. For all of us, the Union is the framework for our common future. I would also like to reassure you that there will be no legal vacuum. Until the United Kingdom formally leaves the European Union, EU law will continue to apply to and within the UK.”

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