Brexit bolt: Agribusiness firms look to set up hubs outside UK

By Jane Byrne contact

- Last updated on GMT

© GettyImages
© GettyImages
A workshop organized recently in London by the Agri-Brexit Coalition heard UK agribusiness companies are already moving operations out of Britain and others are taking 'irreversible decisions' on site location and investment.

“This event highlighted that the agri-supply sector faces the same challenges as those of car manufacturers and other industries that have hit the headlines in recent weeks,”​ David Caffall, coordinator of the Agri-Brexit Coalition, told FeedNavigator.

“There are undoubtedly opportunities, which agribusiness is keen to grasp with innovative products, technology and services. However, uncertainty is hampering investment and alternative plans for locating outside the UK are being made,”​ he added. 

Speakers at the event were drawn from across the sectors represented by Agri-Brexit Coalition members including machinery, animal health, crop protection, fertilizer, seed breeding and grain and feed trading, segments that account for some £8bn (US$10.56bn) turnover at farmgate.

Some companies reported that their plans to expand from a UK base into the EU-27 had been put on hold; others were looking or had taken decisions to create operational hubs for manufacturing and/or logistics inside the EU-27. Such moves would simplify operations for components or finished goods, they explained.

Clarification call

The workshop heard pleas for greater clarification from the UK government on issues of trade and regulation, post EU exit.

The rationale for such decisions is often complex supply chains, with the example given of vegetable seed and how it can cross national boundaries several times as a variety is developed and then multiplied up for sale. Seed breeding companies said customs delays and tariffs would undermine the sector but an even bigger headache would be the need for thousands of phytosanitary certificates, currently not required in the single market.

In crop protection, a move from a hazard to risk-based approach would be welcome. However, for growers looking to export produce to the EU, the European approvals system would likely take priority, speakers said.

Representatives of the crop protection and animal health industries highlighted the complexity of product labelling that Brexit may bring and the extra investment needed is unlikely to be justified for niche crops or health issues.

Speakers said liberal trade regimes could be a double-edged sword for some businesses. While they may open up other markets, they could also expose the UK to the potential of product dumping – putting both UK standards and business at risk, they explained.

The uncertainty of how farming may fare after Brexit adds to the overall uncertainty, the workshop heard.

The Agri-Brexit Coalition’s stated purpose is to inform and influence the government during the negotiations to leave the EU in order to achieve a positive outcome for stakeholders involved in UK agribusiness. It is coordinated by the Agricultural Industries Confederation (AIC).

Logistics challenges

Last November Dutch feed group, ForFarmers, which has extensive operations in the UK, reported that the reliability of its service to its customers in the UK was being negatively affected by a shortage of drivers.

Caroline Vogelzang, director of investor relations and communications at ForFarmers, told this publication back then:

“We had an issue with our delivery given the higher than usual turnover of drivers and the fact that these appeared difficult to replace as many non-UK drivers are leaving the UK due to concerns around Brexit."

It incurred additional costs to deploy third party logistics providers in order to ensure regular service levels in the UK, and it added that the rollout of its previously announced supply chain optimization plans in the UK was delayed due to those developments.

When asked how the group was managing the insecurity generated by Brexit in general, she said then:

“We have mentioned in previous releases that there is uncertainty in the UK about the consequences of Brexit, leading to the fact that farmers show caution in taking decisions to expand their businesses.

“Having said that, we also have stated previously, and repeated this today, we are positive about our mid to long term UK strategy given the low self-sufficiency rate particularly in the swine sector in which we have a prominent position.”

House of Commons briefing

In December 2017, a House of Commons committee inquiry heard oral evidence from livestock industry players about the implications of uncertainty generated by Brexit for trade in agricultural goods.

A raft of representatives from the dairy, pig and poultry sectors briefed​ ​the UK parliament’s Environment, Food and Rural Affairs Committee about the challenges and opportunities prior to and post-Brexit.

Andrew Saunders, agriculture director, Tulip Ltd, which is part of Danish Crown, told the politicians one of the hurdles the UK pig and chicken industry currently faces is not being fully able to understand the future cost of producing meat in the UK.

He said forward feed purchasing is problematic because of a knowledge gap, that nobody knows what the tariffs are going to be, or otherwise, post March 2019.  

“We import quite significant amounts of feed raw materials like soy that are required for protein to go into animal diets.

“We started to look into purchasing those raw materials post April 2019, post Brexit, and we are now faced with a scenario where we cannot get quotes for that product.

“In terms of looking ahead, scaling up and planning our business, because of the uncertainty, we are now in a market where we cannot identify those costs because suppliers will not quote to us. That lack of certainty prevents investment from taking place  ...”

All the livestock sector representatives stressed a frictionless trade deal with the EU is paramount.

“Trading within Europe is absolutely vital for the sector​,” said Edward Barker, senior policy adviser, at the UK’s National Pig Association (NPA).

While there have been a lot of scenarios produced that make the UK pig sector look like it has a particularly rosy outcome in the event of a hard Brexit or a no-deal scenario, he said he wanted to bat that suggestion away very quickly. 

“Because not having access to the single market or even just having a trade arrangement with Europe is extremely serious, mainly for carcass balance. The carcass balance situation between Europe and us is quite delicate and we really want to maintain that at all costs. We know that this is a two-way scenario: that Europe exports a lot to the UK and we would want to try to continue that.”

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