“We all started 2021 thinking something like ‘well, it can’t get worse than 2020’, but as we near the end of what has been another volatile year, I’m not sure. our hopes since January have been right, ”writes John Giles, division manager at Promar International in this guest post.
The UK’s exit from the EU was finally secured at the last minute in December 2020, but left companies little time to really organize themselves properly. The impact of Brexit has been felt throughout the industry and the COVID pandemic has also caused major headaches for producers, wholesalers, importers, distributors, retailers and catering businesses, as well as consumers.
So what has 2021 seen happen? The answer is “a lot”, and here are some of them:
- The issue of personnel and labor – all along the supply chain, from farm to packaging / storage, product distribution and then to point of sale in retail and catering, this has been a major headache all year round
- Energy costs – we have seen a huge increase in the cost of energy since the September / October period, but none of the root causes for these increases have disappeared and we will see them persist into the new year
- Trade friction with the EU – at the start of the year we reached a position with the rest of the EU which saw no tariffs and / or quotas on trade. The role of non-tariff barriers, however, turned out to be a much bigger issue for UK businesses, but what were we really expecting? We have, in effect, ended a 40-year marriage with the EU. To wait for relationships to normalize after just a few months was unrealistic. It may be several years before this is all resolved and we are on “good terms” again. The UK has never been a major supplier to the rest of the EU for fresh produce, but we have a strong link to the continent for imports
- Food service – boom or bust? Consumers, who were not allowed out for Christmas last year, appear determined to make up for lost time, and meal reservations at pubs and restaurants are at a high level. Over the next few weeks, however, the likely spread of the new COVID variant, Omicron, may well see them decide to stay closer to home. The restaurant industry will therefore be on a knife-edge for the next few months or so, as consumers decide to go out and play or stay home.
- The circle has come full circle in the new trade deals – at the end of October, the UK and New Zealand agreed in principle to sign a free trade agreement between the two countries. There is a certain irony in the latest developments in the UK-New Zealand trade deals in agriculture and food. Before joining the EU in the early 1970s, New Zealand and other Commonwealth countries, such as Australia and Canada, were major suppliers to the UK of meat, dairy and horticultural products. If you go another 45 years, it seems that the wheel has come full circle as we redevelop trade relations with these countries again. NZ has been, throughout this time, a major supplier to the UK – and likely will be in the future.
- The Future – New Zealand’s apple exports are highly diversified, with significant volumes destined for Asia, the EU, the United States and the Middle East. As far as the UK is concerned, it is the second most important export market after the rest of the EU for New Zealand industry. As an export market, the UK is then closely followed by countries like China and other Southeast Asian countries like Vietnam, Thailand and Taiwan. Russia and India have also experienced strong growth over the past 5 years for New Zealand producers and exporters. However, the appeal of Asian markets remains very attractive and expecting a further influx of New Zealand fruit imports into the UK, at least in the short term, seems unlikely.
Is everything bad?
It all depends on what happens over the next few weeks with Omicron, of course. Until recently, however, some banks predicted that the UK economy would recover sharply in 2022, possibly with GDP growth of up to 6%. This would start to make life a little easier for most members of the product supply chain, including consumers. Some enterprising producers have found new markets in the Gulf and Southeast Asia. The schemes for seasonal workers have recently been extended. The UK market – despite all of its challenges – still appears to be an attractive market with US, German and Russian companies all looking to invest in the retail space.
While the UK fresh produce supply chain has been much more vulnerable than we would have liked over the past 18 months or so, and may continue to be, we must remember that it has also been shown to be very resistant.
Pressures on environmental and sustainability issues are mounting, with ambitious targets throughout the supply chain to reduce carbon emissions. Many of the factors we have mentioned here are not just going to go away. Undertaking a proactive business resilience audit is a critical thing to do. Developing a good idea of your upstream and downstream supply chain (s) is going to be essential. Staying close to customers seems more important than ever.
The UK commodity sector hasn’t seen the end of change – indeed, post Brexit and post COVID we’re likely to see a new wave of market and consumer trends take hold of the UK. ‘industry. The rest of this decade will also be characterized by the impact of the new trade agreements that we aspire to sign in the coming months and years, with the United States and India in particular.
John Giles, who is a division manager at Promar International, the consulting arm of Genus plc, and has worked on production assignments in some 60 countries around the world, including the UK, the rest of the EU, the Gulf, SA, NZ, Chile, India, China and Southeast Asia. He is also president of the annual City Food Lecture.