As the old proverb says, there is nothing certain, but the uncertain. On the 24th January, the UK’s Supreme Court ruled that the government must seek parliamentary approval before triggering Article 50. This came exactly a week after the Prime Minister’s speech outlining her vision for Brexit.
In her speech, the Prime Minister introduced the UK government’s 12 key priorities for negotiating Brexit. These include maintaining the Common Travel Area with Ireland, leaving the EU Single Market and pulling out of the EU Customs Union. Instead, the government will seek a tailored customs arrangement and a “new, comprehensive, bold and ambitious free trade agreement” with Europe.
What the EU’s 27 other member states will allow, however, remains unknown. The European Commission responded to the speech by describing the upcoming talks as “very, very, very difficult” and EU member states are adamant that membership must be superior to any Brexit deal.
Potential and existing impacts
This has already had business implications for the Irish food and drinks industry. Political and economic uncertainty reduced the value of the pound by 13% against the Euro in 2016. This has resulted in food price increases across a range of sectors. Most recently beer has been in the spotlight, with Carlsberg increasing prices by an average of 2.6%. It has also raised questions over who should foot the bill; the supplier, retailer or consumer.
Border controls are also a concern, according to Bord Bia’s Brexit Survey. Wheat, beef, and dairy are just some examples of product that passes over the border into Northern Ireland a number of times during processing and packaging.
Finally, Brexit uncertainty has resulted in a rise in UK inflation and drop in consumer confidence. Last week’s FoodAlert outlined how inflation has risen to its highest rate for over two years, largely driven by food prices (alongside the cost of airfares and fuel). This is likely to strain the spending power of British households.
Strengthening relationships
As part of Bord Bia’s actions to address the current market volatility, exchange rate forecasts for 2017 are published weekly on the UK Market Information web page. Food prices changes and other UK market trends are covered here, as well as in weekly FoodAlert articles.
Potential border controls for Northern Ireland were raised at Bord Bia’s London Brexit Seminar in December 2016. Ian Wright, Director General of the UK’s Food & Drink Federation (FDF) described avoiding this as a priority for his industry. In response to Prime Minister May’s speech, the FDF has urged the government “to find a practical solution which avoids the introduction of any kind of ‘hard’ land border” at Northern Ireland.
Despite the various scenarios being speculated in the media; nothing has changed for the Irish food & drink industry from a legal perspective. There will be no changes until April 1st, 2019 at the earliest after the UK has left the EU.
Suppliers can use this time to strengthen existing customer relationships and develop new ones. According to a recent Harvard Business School article, the ability to deliver positive negotiation outcomes depends on positive relationships. Brexit has highlighted the need to deepen customer engagement and follow market insights to ensure customer needs are being met. It also emphasizes the importance of extending market reach, both within the UK and abroad.
With world-class brands and a globally recognized food safety, traceability and sustainability scheme; the Irish food and drinks sector is well placed to overcome the challenges posed by Brexit. These key points of differentiation, combined with trusting and collaborative relationships, could be the certainty UK customers are looking for.
For more information please contact shane.hamill@bordbia.ie
Source: Bord Bia – BREXIT VIEW: How will Brexit impact your relationships?
