The clock is ticking, the hours are going by. There is a strong possibility a no post-brexit trade deal will be struck with the EU, Boris Johnson has warned.
Where would this leave the UK food and beverage (F&B) industry?
According to recent economic estimates by MCA Insight, a ‘disruptive’ no deal Brexit will slash at least £3.4bn off the value of the UK’s eating out market.
The terms between the UK and EU will be reverted to commitments laid by the World Trade Organisation (WTO), with the accompanying tariffs to pay come the new year.
Impact on the supply chain
Imposition of taxes could impact the price of supplies such as food imported to the UK. The temporary structure could also cause delays at ports.
Currently the UK imports as much as 80% of its food, and much of it comes from EU.
Over 50% of the fish we eat in the UK is imported from other countries and might face delays clearing customs, according to Just-Eat.
99% of frozen potato products, such as chips, come from the EU. Almost all the spinach, chillies and tomatoes consumed in the UK are imported from the EU.
If supply chains slow down, products may not arrive fresh which will impact food quality in restaurants, possibly damaging brand reputation as well as operators bottom-line.
In response, some restaurant chains have resorted to stock piling ambient lines as a precautionary measure.
Whilst those that predominately use fresh produce have been busy working with suppliers to minimise disruption of fresh produce from abroad:
- Asking their wholesaler or supplier what products they are expecting a shortage of,
- Reviewing their menu to make changes, etc.
In true ‘stiff upper lip’ style, many restaurants and pubs will look to innovate: source locally, back British and adopt smaller style menus which change according to season.
Dependency on the UK’s limited agriculture output will be at an all-time high.
The UK’s agriculture community did very well in providing provisions for the F&B industry long before joining the Common Market and, ultimately the EU, reported RL.
Back then operators had to juggle their menus according to the seasons and haphazard food supply.
This is of course a big plus for British farmers, manufacturers and the British economy as a whole.
Impact on supplier prices
Many large restaurant chains have exploited their buying leverage to secure prices for the next 12 months.
Growing chains have also been able to mitigate price increases as their volumes are increasing.
Independent Restaurants and pubs are likely to have struggled the most to prepare for the future of a no-deal Brexit. They face the prospect of price increases and supply shortages.
The BRC warned that tariffs of 48% would be added to beef mince, 16% to cucumbers and 57% to cheddar cheese.
However, the UK has been over reliant on imports for far too long, especially for specific produce lines, and a no-deal Brexit will be the stimulus for change.
For example, the BRC reported that retailers import large quantities of Cheddar Cheese, a quintessentially English product, from the EU.
Importing Parmesan or Brie from EU is understandable, but seriously Cheddar?
So where does price pressure leave operators?
Will alternative strategies such as expecting consumers to pay more, for less plug the gap?
As a nation we must be prepared and able to produce a lot more of our own and pay farmers a decent return for their produce.
Backing British will deliver a range of benefits:
- Fresher, healthier and better-tasting dishes
- Local produce contributes to the local economy
- Sourcing locally is great for restaurant reputation
- Locally sourced food is better for the planet, etc.
In addition, we must look to source those foods we currently import from the EU – and cannot fulfil locally – from other markets, ready and willing to supply us.
Impact of inflation
A no-deal Brexit is likely to make the pound drop even further. At least, there will be a period of volatility.
Restaurants and pubs can expect higher product costs to account for both changes to the exchange rate and expenses that stem from transport issues.
In addition, skyrocketing inflation (and possibly tax increases) after unprecedented government MMT stimulus during the pandemic.
A no-deal Brexit will have clear implications on consumer confidence and spend.
The Grocer expects rising inflation prices to squeeze household incomes at a time when consumers are limiting discretionary spend.
Yes, it’s easy to feel battered by endless stories about pressures on the industry.
However consider why some restaurants flourish, whilst others struggle for survival during this time of unprecedented change?
Successful operators are rapidly turning to next-gen technologies to improve their agility and tackle deep rooted issues that have existed for years – relating specifically to efficiency, performance and insights.
Before, these embedded issues were tolerated because margins were good enough – and the chief focus was on the customer experience.
Now, modern restaurants need to be highly tuned, tech-first businesses able to manage every nitty-bitty detail of margin control.
Impact of labour accessibility
In the UK, the reliance on the EU labour force is extensive: almost 25% of food industry employees are EU nationals.
The following countries are all members:
Austria, Belgium, Bulgaria, Croatia, Cyprus (not Northern Cyprus), Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden.
Changes in residency rights and employment requirements will hit the industry hard.
Restaurants and pubs will face a hard time getting workers, especially in Britain’s rural countryside areas where transport is limited.
Citizens who have lived in the UK for five years or more are eligible for settled status, and those who have lived in the UK for less than five years are eligible for pre-settled status.
However, many EU workers have already chosen to pack their bags.
Similarly, sectors such as Britain’s curry restaurants, which contribute nearly £4 billion to the country’s economy and have around 100,000 workers struggle to find the right staff, according to CLH News.
A KPMG report highlighted that Britain needs at least 62,000 EU workers annually to plug gaps and run the activities in the hospitality sector.
The impact is most severe in cities like London where EU workers account for nearly 40% of workers, who mostly work on zero-hour contracts.
Never has it been as important to ‘do more for less’: improve efficiency of staff, manage CoL, encourage performance and maintain standards.
The F&B sector is a people-business foremost, and the right technology can help ensure uniformity of processes and standards and bring your casual working staff into the A-game.
Teams outperform individuals.
Technology can help by not only eliminating the ‘grunt work’ but with communication, management, and an understanding of group process and disciplines.
Impact of changes to food standards & hygiene rules
A significant proportion of UK legislation regarding food safety and hygiene originates from laws created by the EU.
This includes HACCP guidelines.
The current EU laws will be converted into UK law from exit day and will continue to apply in the same way.
It’s unclear whether moving forwards the UK government will create its own new rules or keep the integrity of the current EU laws.
For the time being, operators should continue to adhere to current food standards and hygiene rules.
They should also regularly visit Government websites to keep up to date on changes to laws and guidance.
Rules on allergen labeling and carrying out Rights to Work checks for example have recently been passed into law by Parliament.