What's next for Brexit?
The United Kingdom voted to leave the European Union almost 3 years ago. Two dates by when we should have left the EU have since passed. The latest of these is now set for the end of October.
In the UK Parliament, there has been political log jam for many months. In return, some EU countries such as Ireland and the Netherlands have made it clear that they would rather the UK didn’t leave at all. Others are more tough-nosed in their approach.
The ongoing wrangling in the UK cost Prime Minister Teresa May her position. She was personally a “remainer” and looked to reach a consensus across the political spectrum, but failed. In the end, she ended up pleasing no one.
Enter a new prime minister — Boris Johnson. He is a committed “leaver.” His first cabinet appointments were packed full of other committed “leavers.” He has said repeatedly he is willing to walk away from the EU in October without any deal in place.
But even if Boris wanted to do this, it would still need to be ratified by the UK Parliament. To date, this has proved to be impossible. But a $125 million public advertising campaign funded by the government on No Deal suggests he is deadly serious about this.
At the same time, he also suggests that he sees the chances of a No Deal Brexit as minimal and that the UK could still stay in the EU Customs Union for a further two years while the UK renegotiates what was agreed under May’s leadership.
The facts are, though, that the UK has historically been a large net importer of fresh produce. We are only 40% self-sufficient in horticultural production. Put bluntly, we have to import.
There is a danger that imports could be severely impacted if the UK left with No Deal. World Trade Organization tariffs for fresh produce range from 15% to 20%. This would inevitably see prices rise. No one wants that, not least the consumer. And certainly not fresh produce exporters to the UK from the rest of the EU, the U.S., Chile, Peru, South Africa, New Zealand, etc.
There has also been talk of new trade deals with the rest of the world, post Brexit. This includes the U.S.. On his recent visit to the UK, President Trump talked of doing a “quick and outstanding” trade deal with the UK. But how quick is quick — two years, three years, five years? And “outstanding” for who? Agriculture and food would be at the heart of this.
Rightly or wrongly, the UK has very strong views on areas such as chlorinated chicken, hormone-treated beef and GM soybeans. This will not be an easy negotiation. Talks on this could begin in August, though, according to the latest reports, and might end up with U.S. exporters having much better access to the UK.
So, what next? No one really knows the final outcome. Maybe the UK leaves the EU on Oct. 31, but with some sort of extended transition period in place to sort out the fine detail? Maybe we do just walk away with No Deal?
In the meantime, the UK economic indicators are surprisingly strong despite the uncertainty, but consumer confidence is still somewhat fragile. The threat of a No Deal Brexit still acts as a brake on some areas of commercial activity. And at retail level, online shopping and the role of discount stores Aldi and Lidl still put pressure on the more established supermarkets. We have got used to changing times in the fresh produce sector and volatile market conditions seem to be the new norm. It looks as if we had better get used to it, too.
John Giles is a divisional director with Promar International, the value chain consulting arm of Genus PLC. E-mail him at [email protected].