Emerging challenges for the UK food and drink sector


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COVID-19 has challenged the UK food and drink sector, in a once in a generation way. March 2020 saw the highest ever retail sales as the first lock down commenced, at the same time, food production facilities were radically re-engineered to comply with ‘social distancing’ policies.

COVID-19 has had a huge impact on the UK economy and Brexit could present another significant challenge for UK businesses. As the Brexit transition deadline approaches, European agri-food groups are reiterating how a failure to reach a deal on future EU-UK trade relations will result in a devastating shock for businesses and traders already struggling to cope with the fallout of the COVID-19 pandemic.

Food and drink industry bodies have warned of the profound impact a no-deal Brexit would have, especially as businesses navigate the economic difficulties resulting from the coronavirus pandemic. British food and drink exports have already decreased, with the Food and Drink Federation (FDF) revealing that in Q1 of 2020, food and drink exports fell by over £700 million (-12.7%) compared to the same period in 2019. Sales to the EU were reportedly hit the hardest, with total value falling by 17.4% compared to 2019. The impacts of COVID-19, with the closure of the hospitality and travel sectors, meant a loss of sales into the high-value restaurant and out of home sector across Europe.

The impacts of Brexit could represent another significant departure from ‘business as usual’. The virus has created a supply and demand shock to businesses globally and the pressures from a no-deal Brexit will only add to this for UK producers.

The global food supply chains are affected by variables such as incomplete trade agreements, currency instability, geopolitical insecurity, war, climate change, and an ongoing (or resurging) pandemic, all of which, may result in future supply shortages. Businesses cannot plan for all of these, but a strong recognition and understanding of the multiple global regulatory guidelines will be invaluable skills sets for food and drink companies. Government support will be required at a national and local level to support the whole sector, providing opportunities for all sizes of companies to trade and compete post-Brexit.

Disruptions across supply chains will be particularly severe in a no-deal Brexit scenario due to tariffs and lengthened customs processes. The effects are particularly prominent for trade flows, resulting in reduced product availability from the European Union, reduced volumes across the UK and the EU, and higher prices for branded, unbranded and specialty products.

At the most extreme, if UK food and drink production were to collapse, there may be negative implications for overall food resilience in the UK.

A recent survey reported that only 3.5% of food and drink business were prepared for Brexit. It is not too late, but it is crucial that food and drink businesses respond successfully and quickly to events as they unfold. To secure against the issues highlighted, businesses should:

  • Perform a full analysis and impact assessment of the known changes across the key areas of the business, these include – supply chain, workforce, tax, legal and regulatory
  • Establish a project management office function that appreciates the cross-functional challenge of Brexit and has buy in from all key areas of the business
  • Retailers need to consider which changes in shopper behaviour will become permanent so they can identify the solutions that their business should adopt
  • Food service companies should re-write business plans with a start-up mentality.  They will need to balance customer focus with practical operational issues and work collaboratively with partners to achieve this

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About Where Now Consulting Ltd: Where Now Consulting is a management consulting company that focuses on helping its clients to grow and compete. The company offers a range of consulting services, including business turnaround and performance improvement, formulating market entry strategies, mergers and acquisitions, joint ventures and alliances, and sales and distribution strategy and management.

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