The potential impact of the Brexit on food and agriculture (F&A) companies in and outside the UK is huge. The future trade policy of the UK with the EU and the rest of the world will be the subject of negotiations in the coming years, with an uncertain outcome. This note explores the impact of three scenarios for future British trade policy, depending on the different levels of future tariffs: freezing today's trade flows, the protectionist scenario, and a free-trade scenario called the Great Global Britain scenario.
The UK is a large net importer of agricultural products, with total annual F&A imports ammounting to GBP 47.5bn. The UK's top three imports are: animal protein, fresh produce, and consumer foods. The EU is the UK's largest supplier of imported agricultural products with the Netherlands, France, Spain, Germany and Ireland ranking highest in these trade flows. As import tariffs on agricultural products are relatively high, trade flows will be heavily influenced by the introduction of import tariffs.
Beyond tariffs, two other issues will influence the future of F&A trade between teh UK and the EU. The free movement of workers between the UK and the EU is expected to be affected by the Brexit. This could impact the F&A sector more than other sectors, as, on average, 32 percent of British F&A workers come from EU countries. Furthermore, the relative stregth of the British pound will impact trade flows, while British farmer incomes can benefit from a weaker pound as farmers improve competitiveness with regard to imports. in fact, the weakening of the pound potentially makes up a part fo the potential loss of direct income support from the EU after the Brexit.
This report was produced by Rabobank’s Food & Agribusiness Research and Advisory team - visit the FAR website for more.