Brexit – how foodservice and catering operations can prepare.

Brexit

- how foodservice and catering operations can prepare

Oliver Hall, managing director at allmanhall – an independently owned food procurement company - looks at the potential impact of Brexit on the foodservice sector with advice on how to become as agile as possible in these uncertain times.

PROGRESS?

Whilst Brexit negotiations continue in earnest, it is di cult for those of us on the outside to see what progress has been made. So, what can we assume? Well, Michel Barnier has tweeted a photograph of himself at a London sports eld in search for a level playing eld. So we can assume that the EU red line on workers’ rights, environmental standards and state aid is still a big point of contention… The UK’s chief negotiator, Lord Frost, maintains that good progress has been made but wide divergences remain and that businesses must prepare for the change from 31 December. We can therefore surmise that the UK still is looking for solutions that respect national sovereignty, including shing. Both sides seek solutions to the same unresolved sticking points, whilst we wait to see if time constraints can assist in achieving joint concessions and consensus. It is worth noting that if an agreement is reached it is unlikely to be comprehensive, and thus negotiations will continue into the New Year, come what may. Is it plausible that some on the UK side may even consider if an advantage can be gained from negotiating from a position of no deal in the New Year.

BREXIT KEY DATES

The key date remains 31 December 2020. So far, both sides have posted, and missed, key dates, so it is best to assume that the situation is very uid, and anything is possible up until the 31 December. We do know that an agreement needs to be rati ed in the European Parliament beforehand, but it has been mentioned that this could even sit after Christmas if necessary.

RISKS AND IMPACTS

Arguably, the agri-food sector is the most heavily impacted sector in the event of a no deal outcome with the EU. In trade terms, food and agricultural products are the most heavily impacted by tari s and would therefore experience the highest cost increases.

Other factors also play a signi cant role, such as the strength of Sterling, border disruption, regulatory standards, and access to seasonal workers which is impacted by the end of freedom of movement for European workers from 01 January 2021. The farming industry employs 70,000 seasonal workers a year, mainly from Eastern Europe, and urgently needs to understand the rules from January, which have yet to be announced.

Lack of clarity impacts advanced crop production planning, which includes, land rentals, seed procurement and labour scheduling. G’s Growers, for example, one of the largest growers in Europe are

Background

Oliver Hall co-founded allmanhall (www.allmanhall.co.uk) in 2006. Whilst working on growing the business, he studied with the Chartered Institute of Procurement and Supply to achieve MCIPS quali cation, and this expertise in procurement and understanding of the complex factors that a ect the supply chain is now a key part of allmanhall’s solution for clients, assisting them with successful management of, and collaboration with, their supply chains.

considering moving up to half of their UK spring onion and radish production to Senegal, and some celery production to Poland due to lack of clarity. To highlight the scale of the challenge, a National Farmers Union survey found that UK residents only made up 11% of the workforce this year, despite the widely advertised Pick for Britain scheme. It is worth noting that the 2020 seasonal workers pilot scheme that allowed up to 10,000 workers from outside the EU on temporary visas was highly e ective.

All the remaining realistic outcomes of the current negotiations will lead to some food supply disruption and cost increase.

COST IMPLICATIONS

Even in the event of a deal, at allmanhall we are forecasting in the region of a 3-5% weighted basket price increase, through non-tari costs. If there is a no-deal scenario, then we head onto WTO Terms and this could result in an excess of an 8% increase, depending on the speci c mix of food purchases. The WTO tari s on food are, on average, signi cantly higher than most other imported categories. For food, the tari s average at 18%. With 30-35% of UK consumed food imported from the EU, it means that a circa 6% impact on the weighted cost of food is likely. There are some food types that are hugely impacted by tari s. Irish beef (R4L) would increase by 85%, Cheddar by 47% and canned tomatoes by 14%. Unfortunately, the list goes on (a schedule of the published tari s can be found at https://www.checkfuture-uk-trade-tari s.service.gov.uk/ tari ).

Key Cost Forecasts

Deal= 3-5% food cost increase. No deal= 8%+ food cost increase.

However, the initial supply disruption is more challenging to forecast and therefore may be even more problematic in the short term.

SUPPLY DISRUPTIONS:

The NAO (National Audit O ce), the UK’s independent public spending watchdog, identi ed the following areas in its recent report published on 6 November 2020, regarding the government’s work in preparing for the EU exit. 1. The Goods Vehicle Movement

System (GVMS) for facilitating transit across the UK is still in development. 2. It is unlikely that inland Border

Inspection Posts for processing vehicles and loads will be completed in time. 3. Trader readiness for EU border controls is forecasted to be low (between 40% and 70%). 4. There is no con rmation that government and third-party IT will be integrated, tested, and live for 01 January 2021. 5. Customs and freight handlers; experts who facilitate the movement of goods across borders have insu cient capacity. 6. The government’s tool to provide advice on export documentation for vehicles over 7.5t ‘check an

HGV IS ready to cross the border’, is still incomplete. 7. HMRC estimate that it will need to process 270 million annual customs declarations, an increase from its current level of 55 million. 8. 7,000 is the UK government reasonable worst-case scenario for the maximum number of lorries that may need to queue at the short channel crossings. 9. 60% to 80% of normal ow of lorries at the short channel crossings forecasted for the weeks following the end of the transition period.

This serves as rather stark analysis. Thus, being prepared for disruption is critical. With the random nature of border crossing disruption that may unfold, even the most prepared suppliers could be adversely impacted. It only takes the lorry in front to be held up…

SO, WHAT CAN YOU DO TO PREPARE?

Ensuring that your food and catering operations are as agile as possible is paramount. There are four key actions foodservice and catering operations should consider:

Stock up

Although a challenging time of year for many organisations, consider increasing your stockholding. Increasing stock levels of ambient and frozen products may alleviate any initial challenges on fresh produce from the EU. Using frozen veg and tinned fruit may need to be an option.

UK product

Consider using a higher proportion of UK product, which should reduce the chance of border disruption. However, do be aware that constituent ingredients used in UK food manufacture may be impacted.

Flexibility

Try to be as exible as possible around your o ering. Wholesalers are more likely to increase stocks of own-label products. Prepare to order own-label instead of branded goods where availability issues occur. There may be a need to be exible on the quality of fresh produce. Increase your order lead time. It is not recommended to order day one for delivery on day two for use on day two. Operational exibility is key. Supply disruption may cause increased product substitutions, so it is imperative that your allergen aanagement processes and best practice are followed.

Communicate

Ensure that you are regularly talking to your suppliers and advising your consumers and wider stakeholders to ensure that supply challenges are understood.

In a period of so much uncertainty these are a few small steps that can be undertaken now to make the transition easier once we know more in 2021.