UK-based ingredients manufacturer Ulrick & Short has underscored the need for a diversified supply chain in contingency planning for a potential “no-deal” Brexit.
The company is currently investing in the construction of a Netherlands-based facility, which will act as a trading and technical base for EU customers in the event of a no-deal.
An overall lack of clarity from government is decried by the company as “the worst thing for manufacturers,” as it means that businesses across the entirety of the food sector must prepare for all eventualities.
Speaking to FoodIngredientsFirst, Robert Lambert, from the clean label ingredients manufacturer, explores the likelihood of a no-deal Brexit as the clock counts down to the October 31 deadline, but stresses Ulrick & Short is well-prepared in any case.
“Boris Johnson’s rise to UK Prime Minister will make a no-deal Brexit more likely insofar that he is prepared to go through with it if necessary,” he says. “However, a no-deal scenario did not have the backing of Parliament – or the majority of the country – so it is firstly questionable as to whether it is legally possible for Johnson to take the UK out on a no-deal scenario, but secondly, it is still within his interests to come to a sensible arrangement with the EU.”
“It is the hope of Ulrick & Short that a sensible agreement can be found to ensure that there will be no hard borders or economic hurdles that will ultimately damage the UK and European economies,” he adds. “We have taken the necessary precautions to mitigate any potential difficulties of no-deal.”
Lambert notes that a diverse and secure supply chain is key to tackling some of the challenges of constricted trade, in case of a no-deal scenario. “For EU customers, a mainland Europe-based subsidiary, Ulrick & Short BV, has been established in the Netherlands, where we will be able to trade from and provide service to all of our EU customers without any disruption, regardless of deal or no-deal scenario.”
Adding to the company’s current warehousing capacities in Hamburg, the new Dutch facility will be operational by April 2020. The company strategizes growing its non-sterling sales to reduce the requirement of foreign currency purchases, providing a hedge against sudden and further weakening of the pound sterling.
But even for multinational corporations, full certainty is not assured. “However, the things that are beyond our control, such as any potential impact of tariffs for the goods we bring into the UK, and the impact of currency movements, could have an impact on the cost of our products to UK customers. Although we can keep this to the absolute minimum because of our preparations, this will be a concern to the entire food sector,” adds Lambert.
“Obviously there is a considerable amount of uncertainty within the food industry in regards to potential supply chain disruptions, tariffs and food standards. The lack of clarity is probably the worst thing for manufacturers as it means they have to prepare for all eventualities, and can’t prepare for a specific outcome,” he adds.
In no-deal preparations, Ulrick & Short will be holding additional stock within its UK warehouse to mitigate delays as a result of new customs checks at the UK border. “We are stockpiling all of our standard products in accordance with customer forecasts. We have enough stock to ensure any level of reasonable disruption will not affect ourselves or our customers,” says Lambert.
“The stock we have is sufficient to mitigate against any reasonable customs delays. Moreover, the new Transitional Simplified Procedures, whereby businesses are able to transport goods from the EU into the UK without having to make a full customs declaration at the border is a further reassurance,” he adds.
“However, as Ulrick & Short is a global organization with partners outside the EU, we are very familiar with customs clearance procedures, and are well-equipped to handle any customs queries. It will be business as usual for our company,” concludes Lambert.
With the likelihood of a no-deal Brexit looming over UK businesses, contingency planning is becoming increasingly significant. Last month, the UK Food and Drink Federation (FDF) claimed that a no-deal Brexit “will inflict serious and – in some cases mortal – damage on UK food and drink.”
Hard-hitting impacts of no-deal Brexit on UK consumers
Writing in The Lancet, Professor Tim Lang of the Centre for Food Policy at City, University of London, asserts that the UK government’s planning assumptions of expected food disruptions have been “leaking out” and should be made public. Earlier this year, a leaked memorandum to cabinet ministers indicated that food prices in the UK could rise by up to 10 percent and there would be disruptions to fresh produce supplies.
Most UK fresh produce imports come from within the EU.Lang distinguishes the UK’s present predicament as “remarkable”. “A country that received 28 percent of its food in 2018 directly from the EU, plus 11 percent more through EU trade deals, is now planning, under the leadership of Prime Minister Boris Johnson, to leave the EU on Oct 31, 2019, with or without an agreement on how and what the terms are for trade, customs and food security. The food implications for consumers and public health of a no-deal Brexit are seeping out of government but deserve full scrutiny.”
Most UK fresh food imports come from within the EU, notes Lang – and 9 percent of fruit and vegetables are from Spain alone. Even food imported from countries outside the EU, such as Morocco or Egypt, are sourced via EU trade deals. With a no-deal Brexit, the UK would effectively be classified as a “third country” under EU and World Trade Organization (WTO) legislation.
No public advice has been given yet on how the no-deal outcome might restrict current dietary health advice, states Lang. He emphasizes that the UK already under-consumes fruit and vegetables, according to statistics by the Food Standards Agency (FSA) and Public Health England (PHE). The outlined concern is that Brexit disruptions will worsen the public health condition, particularly for people on low incomes.
Low-income groups in the UK would disproportionately be affected by the impacts of a no-deal Brexit on food prices and availability, highlights Lang. November is at the end of the UK agricultural growing season, so the availability of domestic fresh produce will decline. For companies, November is when their usual planning and storage arrangements are already under pressure in the pre-Christmas period.
“The main food bank organizers have informed the UK Government that their local groups do not have enough food, volunteer support and storage capacity to deal with any uplift of need,” says Lang. “They want a hardship fund to be established to ensure people have enough money for food. At what point will the public be engaged and informed to help prepare for a no-deal Brexit? And is public health at the heart of planning? The posing of these questions is not new. But a troubling new food planning case study appears to be unfolding.”
Underscoring the need for “engaged food democracy,” Lang maintains that, “the UK government’s rationale for food secrecy is fear of panic buying, which just-in-time delivery systems are vulnerable to. Food industries agree. They know border and transport blockages will happen.”
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