Talks with the EU are finally under way a year after the referendum and the food industry is anxiously awaiting the outcome, writes Nick Hughes.
Friday marked the first anniversary of Britain’s vote to leave the European Union. Much has happened in the subsequent 365 days: there have been demonstrations, legal battles and most recently an election that, rather than give the Conservative Party a clear mandate to negotiate Brexit on its own terms, plunged parliament into further chaos.
Negotiations with the EU have begun with little clue as to where the UK’s priorities lie, but what we know for certain is that the implications of any deal (or indeed no deal) for the food industry are enormous.
Here are 10 issues the food sector urgently needs clarity on as Brexit talks intensify.
Food and drink exports reached a record high in the first quarter of 2017, touching £4.9bn. However, a bad trade deal with the EU could bring exports crashing back down to earth and increase the cost of imported staples such as wheat and dairy products.
The overwhelming majority of UK trade in food and non-alcoholic drink is with the EU, and the Conservative government says it will pursue free trade with European markets. But Theresa May’s pre-election rhetoric about no deal being better than a bad deal suggests a real possibility of the UK reverting to WTO rules – where tariffs on agricultural products are as high as 50%.
Although businesses have welcomed a slight softening in the prime minister’s tone since the election, they continue to stress the urgent need for certainty on future trading arrangements.
The Conservative manifesto pledge to reduce annual net migration to the tens of thousands is of deep concern to a food industry that is heavily reliant on migrant labour. More than 700,000 migrants work in the hospitality sector alone and many thousands more along the supply chain in food production and farming.
The popular narrative that these are all low-skilled, low-paid jobs that undercut British workers runs contrary to Food and Drink Federation estimates that the manufacturing sector will need 130,000 new skilled workers by 2024 in food engineering and science roles.
Whether the food sector will be able to access sufficient migrant labour come 2019 remains open to doubt. An immigration bill announced in the Queen’s Speech will legislate for the end of free movement from the EU. The Conservative manifesto, however, envisaged setting aside “significant numbers of visas for workers in strategically important sectors … without adding to net migration as a whole”.
Is food seen as a strategically important sector? If not, the Food Research Collaboration warns, we are likely to see “a slow strangulation of the food labour market creating a difficulty for replacing workers over time”.
The Common Agricultural Policy has more critics than fans and there’s little question that the current method of subsidising farmers based on the area of land they own rather than their productivity or environmental management has created perversities in the system.
Equally, a complete removal of subsidies after Brexit would probably render vast swaths of UK farming unsustainable, resulting in an increasing reliance on imported food.
Many supermarkets and foodservice businesses have strong commitments to buy British. Could these survive a spike in prices of domestic produce should subsidies be abolished?
Conservative policy on post-Brexit agriculture is vague. A new agriculture bill announced in the Queen’s Speech is intended to provide stability to farmers and protect the natural environment for future generations, while the manifesto committed to providing the same cash total in funds for farm support until the end of the parliament, beyond which there is the promise of a new, yet to be detailed, agri-environment system.
Nine in 10 fishermen were in favour of leaving the EU so there is clearly confidence that any future alternative to the much-maligned Common Fisheries Policy will be better than the status quo.
The government says a new fisheries bill announced in the Queen’s Speech will “enable the UK to exercise responsibility for access to fisheries and management of its waters”. This is true in theory – Britain will be able to claim sole rights to its Exclusive Economic Zone (EEZ), which stretches 200 miles from the country’s coastline – but such a “sea grab” seems certain to jeopardise the trade on which the UK fishing industry is so reliant, and could also result in overfishing of stocks.
Putting emotion to one side, the fact is that the species most commonly landed by UK vessels – pelagic fish such as mackerel and herring – have a very small market in the UK, while popular species such as cod and haddock are largely imported from Iceland, Norway and China.
The issue is likely to divide the industry, with fishermen pushing for more control of our waters and downstream businesses such as supermarkets and restaurants stressing the importance of trade.
The government, meanwhile, will have to decide whether fishermen’s rights are worth fighting for or whether it will cede ground to the EU on fisheries policy in order to gain greater leverage in other negotiations.
The EU has some of the highest food standards in the world and the UK some of the highest standards in the EU, often going beyond minimum legal requirements (for instance, the UK outlawed the use of sow stalls a full 14 years before the EU followed suit).
Talk of trade deals with the US and other third countries, however, has sparked concerns of a watering down of future standards to accommodate free trade with countries where standards are more lax. The US, for example, permits practices such as treating beef with growth-promoting hormones and washing chicken in chlorine and is likely to push for such practices to be included in any future UK trade agreement.
The new environment secretary, Michael Gove, has previously made clear his desire to rid the UK of certain EU directives that he views as holding back businesses, notably the Habitats Directive. Any watering down of EU standards, however, could prove a barrier to future trade with the bloc, as well as adding significant costs to UK businesses in areas such as product labelling.
The Conservatives were the only one of the three main parties not to make an explicit commitment in their manifesto to maintaining current food and environmental standards in future trade deals and are already coming under pressure to do so from groups such as Sustain which want a clause inserted into all future trade deals that requires imports to meet UK standards.
Workers’ rights are to a large extent governed by EU law, in particular the Working Time Directive, which provides for a right to work no more than 48 hours per week, and underpins entitlements to paid holidays and rest breaks.
It was designed to protect people’s health and safety. However, many politicians, particularly those on the right of the Conservative Party, believe it makes businesses uncompetitive and would like to see the UK divorce itself from the directive. Any actions to scale back workers’ rights, however, are likely to be fiercely opposed by Labour under Jeremy Corbyn’s leadership.
The UK originally opted out of the directive in 1993 before Tony Blair’s government signed up in 1998, albeit with a concession that UK workers could opt out of the 48-hour working week.
Some roles within the food chain are excluded from the rules: for instance, fishermen may legitimately be required to work more than a 48-hour week.
It was instructive to note that climate change was not among the “five giant challenges” facing Britain identified in the Conservative manifesto. And while the UK has reaffirmed its commitment to the Paris Agreement in the wake of the US withdrawal, questions remain about the extent to which Britain will remain a champion of the climate change agenda outside the EU.
Domestically, questions also remain about how central low-carbon growth is to the government’s industrial strategy and, more specifically, if and how the government will require the food sector to contribute to emissions reductions targets.
The Conservative manifesto stated that the UK “is at the forefront of action against global climate change”, and noted that we are halfway towards meeting our 2050 goal of reducing emissions by 80% from 1990 levels. UK carbon budgets, however, are currently based on a target of 2C of warming and will need to be strengthened to achieve the “well below” 2C target set in Paris.
Waste is largely a devolved issue with specific policies created at a national level.
In the UK, the success of the plastic bag charge has inevitably led to calls for taxes on other offenders such as coffee cups and plastic straws. Waste, however, didn’t merit a single mention in the Conservative manifesto despite the importance that many businesses, not least in the food sector, are placing on waste reduction.
The government’s recent litter strategy is a step towards creating a stronger anti-litter culture but is far from a holistic plan to create a low-waste infrastructure.
Brexit, meanwhile, must put a question mark over the UK’s future commitment to the EU’s circular economy package despite the government saying it plans to play an active role in negotiations.
Many UK food and farming regulations are currently set at an EU-level based on advice from EU agencies. The European Food Safety Authority, for example, rules on health claims that can be made on food products, while the European Environment Agency provides rulings on the safe use of chemicals.
The UK government has regularly lobbied for exemptions on EU rulings, most recently on the ban on using neonicotinoids, which have been linked to harming bee populations, as a pesticide on crops.
Whether Britain will retain membership of these agencies after Brexit remains unclear. Certainly the cost of replacing them with domestic alternatives would be high.
The EU currently operates the precautionary principle on such approvals, but many Conservative MPs are known to favour the US model of waiting for evidence of actual harm before regulating. In particular, the adoption of a softer approvals process could open the door for more GM food to be produced and sold in the UK.
The Conservative government has repeatedly said it wants to grow more, sell more and export more British food, and indeed food exports are on the rise. But one of the reasons British produce can command a premium overseas is due to the Protected Geographical Indication (PGI) status of certain products, which gives regional and traditional foods legal protection against imitation throughout the EU.
There are more than 70 protected food and drink products across the UK, including Welsh lamb, Kentish ale and Melton Mowbray pork pies.
The former environment secretary Liz Truss previously told MPs she wanted to see a British protected food name status developed in the future, but potential trading partners such as the US may push for the removal of any protections that could create a non-tariff barrier to trade.