Confidence in the UK market has shown a steep decline since the UK’s vote to leave the EU. 41% of polled businesses in the agri-food industry said they were less confident now than in October 2016, with 10% of small and medium-sized enterprises (SMEs) saying they were ‘much less confident’.
The survey was taken from Food and Drink Federation (FDF) members with a combined turnover of more than €11.5 billion euros.
The decline in confidence comes as 90% of respondents have seen rising prices in raw materials over the past four months and 65% have already felt a negative impact on profit margins. Prices are expected to continue rising for at least the next two years, said FDF’s report.
However, with the devaluation of the sterling has come a boom in export and many respondents who felt a drop in profit also expect to offset these challenges through increased sales and exports.
Director general of FDF Ian Wright said: “It’s a mixed picture. Nearly two thirds of members expect to see sales in the UK grow over the coming months. The same number see sales outside the EU growing too. We also know around half of our members expect sales within the EU to grow, so they’re optimistic about their future while worrying about the trading environment.”
The UK’s food and drink exports in 2016 rose above €23 billion for the first time in history.
A new export academy
The FDF has recommended creation of a new academy to help fill the vacuum of specialist workers in food and drink export. With government backing, it says it could work together with the Food and Drink Exporters Association (FDEA) to create a ‘Food and Drink Export Academy’ and provide much needed training.
Bord Bia, which provides similar support to exporters in the Republic of Ireland, receives €50 million per year in government backing and has achieved continued success, something FDF say should be matched in the UK.
Ted Woodward, a media officer at FDF, told us: "We are currently developing plans for an Export Academy with our partners from FDEA. The Academy would help to boost food and drink exports by providing much needed support and training for new exporters and for existing supporters that want to grow in overseas markets."
Priority for the food industry
In response to the survey FDF has written to Britain’s Chancellor of the Exchequer, Phillip Hammond, requesting a number of assurances. Hammond will release the UK's 2017 budget tomorrow.
This started with prioritising the food and drink sector in all Brexit negotiations (70% of trade in food and soft drink is with the EU) and securing working rights of the more than 120,000 EU nationals currently employed in the industry.
“The future relationship between the UK and the Republic of Ireland is particularly concerning to us, given the complete co-dependency in food and drink production. We urge the Government to find a practical solution which avoids the introduction of any kind of 'hard' land border which would damage both economies” the report added.
Moreover, the letter recommends investment in turning the UK into a research and development (R&D) hub for food and drink. Currently the government contributes around 1.6% (€3.5 million) of the sectors R&D budget.
"We strongly encourage Government to incentivise using UK hubs as the centres of choice for investing in R&D, whether through financial measures or ease of operation. The industry itself relies upon and supports extensive networks of Food and Drink Federation Page 6 research sites and helps the UK to maintain scientific expertise. Public funding and highly effective knowledge transfer are particularly important for SMEs, which are some of the most innovative businesses in our sector, yet lack the capacity to undertake R&D on their own account" the letter read.
Phillip Hammond will present the 2017 budget tomorrow (8 March) in Parliament, followed by a debate.