BREXIT

Brexit: The industry responds

By Vince Bamford

- Last updated on GMT

Brexit poll: 52% of UK voted to leave the EU: Photo: iStock - vchal
Brexit poll: 52% of UK voted to leave the EU: Photo: iStock - vchal

Related tags European union

As snacks and bakery businesses across the globe come to terms with the ramifications of the UK’s impending exit from the European Union, we gather responses from businesses, trade bodies and stakeholders.

Manufacturers and suppliers

Weetabix

The results of the EU referendum will offer opportunities and challenges for British businesses. What remains constant is the public’s desire for a healthy and nutritious breakfast.

For Weetabix Food Company, this means maintaining our investment in the growth of our business, both in the UK and across the 80 countries where our products are sold.

We’re confident in the fundamental strengths of our business, the appeal of our brand and commitment to nutrition.

Mondelez International

We have prepared our business appropriately for the outcome of the referendum in the UK and are confident we are well positioned as a business to navigate the consequences of the vote.

As a business that sells products across the EU, we are closely monitoring the situation in terms of next steps.

Our brands are much-loved by UK consumers and we remain committed to manufacturing here in Great Britain.

Cargill

While Cargill believed there were distinct advantages for the UK and member countries to remain together as part of the member of the European Union, the priority now is to closely monitor the situation and ensure that our business interests are protected during the coming months, as the situation unfolds.

Mars

Our support in the referendum campaign was for the UK to remain in the EU as we believe in the benefits from participation in the EU single market. Although we supported remaining within the EU, today’s result does not affect our commitment to our UK operations in Europe and growing our UK businesses. As negotiations and discussions commence to determine the nature of the UK's future trading relationship with the EU, we hope that decisions are made swiftly in order to give our business the certainty it needs.

We are proud of our strong British heritage and our core ambition remains unchanged; to manufacture quality products and serve our customers and the millions of consumers who love our brands.

Nestlé

We note the outcome of the referendum in the UK and the decision of the British electorate to leave the European Union.

The practical consequences of this decision will become clearer in the coming months. Nestlé will continue to operate in the normal course and will follow developments closely.

Trade groups

National Association of British and Irish Flour Millers

Alexander Waugh, director-general: Nabim will be working hard with members and UK government officials to establish the implications for the flour milling sector, our customers and suppliers – but we don’t expect any quick answers.

Obviously there has been a strong adverse reaction in currency markets, which will inflate raw material costs if maintained, but other than that we don’t expect any immediate material change that will affect day-to-day business.

FoodDrinkEurope

FoodDrinkEurope and its members are disappointed with the outcome of the Brexit vote.

This is a blow that will have repercussions across all Member States of the EU; the European authorities and national governments must now take the necessary steps to reinforce the Union.

The peoples of the United Kingdom have made the decision to leave the European Union; this choice will be respected. The European Union must learn from this experience and not allow for further weakening of the EU in today’s particularly challenging context.

EU legislators must continue to make progress on issues close to the heart of businesses, of growth and of jobs, such as the Single Market and Better Regulation. 

Food and Drink Federation

Ian Wright CBE, director general: In March we released the results of a poll of our members which showed 70% support for Britain to remain in the EU.  It's inevitable in the light of those results that the majority of FDF members will regard this as a disappointing result for the food and drink industry.

Now FDF will work on behalf of our members and all those across our industry to find a way through this very challenging period that we face.

We'll focus on working with the Government to understand what this means for trading, market access and regulation to secure the best outcome for British food and drink manufacturing businesses and their customers.

Agriculture and Horticulture Development Board

Jane King, chief executive: The AHDB focus remains unaffected by the decision to leave the EU - to equip levy payers with the tools to become more competitive and sustainable.

Amongst other issues, the decision to leave brings to the fore the need for UK Government to target the best new trading relationships we can for UK food and agriculture both with the EU and other countries.

AHDB has the skills and expertise to contribute to this work in areas such as market prioritisation, market access negotiations and facilitating relationships between UK exporters and overseas buyers. We stand ready to support the industry in identifying how it can best compete outside the EU.

These issues will take time to resolve, but AHDB will play a full part in ensuring UK agriculture is a leading player on the global stage.

Copa & Cogeca

Pekka  Pesonen, secretary-general: The vote was very close showing a slight majority of 52% in favour and 48% against. Copa and Cogeca highly value the UK farming unions’ participation and their support in the EU agriculture policy work. We are still analyzing the impact on agriculture of the vote, based on both EU institutions and UK government decisions.

A key point for us will be to avoid any further disruption to the European agriculture market, given the importance of the economic ties across the Channel and the current agricultural market crisis.

It is crucial to maintain market stability. Over half of UK food and drink exports currently go to the EU and the UK market is also a big export market for food and drink exports from other Member States providing European consumers with a good, diverse choice of quality produce.

We will work hard to ensure that the farming community in the EU or the UK are not the ones to pay the price for international politics and the impact on trade is minimized.

National Farmers Union

NFU President Meurig Raymond: The vote to leave the European Union will inevitably lead to a period of uncertainty in a number of areas that are of vital importance to Britain’s farmers.

The NFU will engage fully and constructively with the British government to construct new arrangements. This needs to happen as soon as possible.

Our members will rightly want to know the impact on their businesses as a matter of urgency.  We understand that the negotiations will take some time to deliver but it is vital that there is early commitment to ensure British farming is not disadvantaged. It is vital that British farming is profitable and remains competitive, it is the bedrock of the food industry – Britain’s largest manufacturing sector.

Red Tractor Assurance

David Clarke, Assured Food Standards chief executive: For now it is business as usual for Red Tractor Assurance.

The UK remains a member of the EU for the immediate future and we will wait with interest to see the trading terms that the UK Government is able to negotiate with trade partners in Europe and further afield.

Come what may we believe that UK shoppers and trade buyers at home and overseas will always want to know that their food has been produced with care.

Red Tractor’s comprehensive standards and robust assessments will continue to play a key role in providing the assurance that they are looking for.

Our Red Tractor logo will have added impetus to act as the leading signpost to quality British food across the marketplace.

Analysts and law firms

Ernst & Young

Julie Carlyle, Ernst & Young retail sector leader: The uncertainty that the leave result brings may mean consumer spending is tempered in the short term. This exacerbates the strain that retailers are already under from the 'margin vice' of deflation, national minimum wage as well as required investment in infrastructure.

For many retail businesses, the impact of any further devaluation of sterling will have a significant impact on the costs in the supply chain although the silver lining for some luxury retailers will be a boost from overseas spend.

Retailers will further be considering the impact on their labour force in the longer term, especially within distribution and logistics where there are a significant number of EU employees, as well as the yet unknown impact on trade tariffs.”

Edison Investment Research

David Stoddart, analyst: The great fear following the Leave vote is a collapse in the value of sterling. Surely every FD has covered against that so there should be no short term effect.

Whether FDI falls to a level that leaves the pound permanently lower will depend on the policies that the UK adopts: were it to remain lower, gross margins would be squeezed to the extent that buyers could not re-source or that absence of the external tariff did not provide an offset.

In the short term, a plunge in sterling would see sharp rises in fuel pump prices that would divert spending from other areas. That presumes that the Remain campaign’s threats about the extent of the economic nuclear winter that would follow Brexit have been ignored and that consumers are still spending. If they are not, the prophecy will have become self-fulfilling and will have hastened the collapse of more retailers and more high streets.

Charles Russell Speechlys

Jamie Cartwright, partner: With the vote for Brexit, the UK now undergoes the prescribed two-year exit process from its membership of the EU. 

The legal implications of Brexit will stretch far beyond the mechanics of EU membership.  Brexit will also trigger a review of EU-derived legislation, some of which may now face the prospect of repeal.  Further, the issue of trade uncertainty will go beyond the ‘high level’ issue of tariffs and quotas (all to be negotiated) and will inevitably bring into focus and review the individual agreements in place between UK businesses and their EU counterparts.

With the prospect of the repeal of certain legislation and the separation between the UK and the EU created by Brexit, parties on both sides of cross border agreements will be forced to reflect upon their trading terms to ensure that they continue to offer the protection they require.

Shore Capital

Clive Black, director, head of research: Currency will, most likely, be the key initial variable influencing investors’ mind sets to our minds; so, what happens to sterling versus the dollar and the euro is important for consumer stocks, noting that most business have hedging in place that means it will take three to twelve months for matters to fully pan-out.

We expect sterling to be weak against the dollar, an easy call; its performance against the euro is more imponderable but has important implications for the fresh food segment in the UK in particular – Aldi & Lidl for example import much more of their groceries than the UK supermarkets, so do they suffer lower margins or increase prices?

Stepping back from the foreign exchange market, at a macro-economic level, there is also the consideration of what the Bank of England may do with base rates, which is a decision balancing any new inflationary pressures that may arise by a sustainably weaker sterling currency, from the need to support what may be considered a still rather fragile economy.

Inflation, of course, influences living standards if there is no corresponding change in wages & salaries, and so consumer expenditure and therefore the sales and margin performance of retailers and their suppliers.

For manufacturers and retailers that may be seeing the cost of goods rising on any sterling weakness there will be the conundrum of what can they pass through to protect or even expand margins or what do they need to do to support volumes against the prevailing economic conditions will be.

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