Insight: Ignoring the hand that feeds us

This week the Prime Minister formally triggered article 50 of the Lisbon Treaty. There are two years of Brexit negotiations ahead but “dangerous levels of naivety” have already left the foodservice sector off the pace, says David Read.

I’ve been asking this question recently at various Brexit conferences and panel sessions: “Given that the UK imports roughly 40% of what we eat, Brexit will likely cause farm subsidies to disappear, and a policy of importing more food from world markets put in its place. Is the panel either encouraged or concerned about the future cost and standards of food available for the UK catering sector?”

The responses from many industry leaders lead me to believe that one of the biggest threats to the catering sector in a generation could be slipping quietly below the radar. Why? Firstly, the food industry doesn’t understand the criticality of its catering sector (where is foodservice represented in the new coalition of food bodies reported in this week’s Footprint news?). Secondly – and because of the predominance of the wholesale supply model – caterers have very little visibility of what is happening in the manufacturing and production end of the supply chain. This dangerous level of naivety could cost us dearly in the years ahead.

Since 1962 Britain’s farmers have received generous subsidies under the EU’s Common Agricultural Policy. Last year CAP payments to the UK totalled about £3bn, making up 55% of farmers’ incomes. Philip Hammond, the chancellor, has announced that the Treasury will replace any shortfall in EU funding to farmers between now and the end of the decade, providing a short-term stopgap. But prospects for the food supply chain remain highly uncertain after that.

Originally, CAP’s emphasis was on production and food security but as farmers were paid for whatever they produced, they over-produced leading to food "mountains". A reform process, including the "greening" of the CAP emphasising environmental practices, has resulted in farmers mostly being paid depending on how much land they own. This has led to some wealthy UK landowners receiving large subsidies. Could Brexit provide a better way?

Some believe leaving the EU is an opportunity to end agricultural subsidies altogether. They think the CAP is hugely distortive given that there is no incentive within it to innovate, leaving agricultural productivity in the UK lagging well behind that of the US, for example. Others argue that removal of subsidy will help Britain to forge new trade deals with non-EU states. The EU is so heavily committed to agricultural protectionism that its ability to sign trade agreements with developing nations is restricted. If the UK adopts a different approach, opening up its markets to food exports from, say, Commonwealth nations, it could gain significant new access for UK businesses.

We should be cautious though: it’s in our interest to maintain a strong farming industry at home and no government should take risks on food security. A sudden and complete withdrawal of subsidy would put a significant proportion of farms out of business with the associated impact on supply and therefore price. Farming is an uncertain profession and one that is increasingly exposed to the challenges posed by climate change. That is why most developed countries, whether inside the EU or not, maintain public funding for farming communities.

I would argue that the right course for Britain is to replace the CAP with a smarter and more innovative system. We could for example, put far more emphasis on paying farmers to tackle specific environmental problems; or to boost training and skills in the workplace; or to invest in research and development projects that boost productivity. We require a world class farming system to survive, and one that maintains and develops the food and environmental standards that we are rightly proud of. Indeed, free trade deals in agriculture are notoriously difficult to agree, which opens up the temptation to compromise on these critical standards.

The food and drink sector is the UK’s largest manufacturing sector. But because of the fragmented nature of the catering sector we are simply not at the table right now. In December last year 25 CEOs of large restaurant businesses wrote an open letter to the Prime Minister Theresa May imploring her to help on a wide range of issues from business rates and the living wage to availability of EU Labour. Yet the huge issues threatening our supply chains did not even get a mention. We need to stop ignoring the hand that feeds us. And as a sector we need become much more involved in protecting the supply chains that will be essential to survival in the challenging years ahead.

David Read is chairman at Prestige Purchasing

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