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Increased efficiency in the food supply chain could help mitigate the impact of higher prices in the UK, which appear inevitable in a post-Brexit world.
“Food prices will rise, not fall,” said Garry Honey, founder of Chiron Risk, at yesterday’s Cool Logistics seminar in London on the impact of Brexit.
“But power over prices resides at either end of the chain – not in the middle.
“There will be political pressure to keep staple foods affordable, but it will be about the muscle between retail brands and consumer brands, to ensure the shelves remain stocked.”
However, while rising food prices are inevitable, argued speakers, the supply chain has a role to play in creating new efficiencies which could help mitigate this.
“We need to think more broadly across the value chain,” said David Read, chairman of Prestige Purchasing. “We need to seek end-to-end discussions.
“The food industry is still very fragmented; there are not enough discussions between farmers and retailers. We need to drive new efficiencies.”
He pointed to the automotive and pharmaceutical supply chains as good examples.
“In pharma, there is real transparency in the supply chain and good forecasting. It takes out a lot of waste. There is an opportunity for the food supply chain to do this too.”
Peter Wareing, a food safety consultant, warned that delays at the border could increase wastage in the chain, especially as the UK lacked storage space. In particular, he noted, salad, soft cheese and meat products would be negatively impacted by delays.
But there were ways to mitigate the risk, he believed.
“A shorter supply chain would decrease the risks. You could also implement a smarter supply chain, using technology like RFID and blockchain, to ensure food has electronic approval – a food passport.”
The UK sources about 50% of its food domestically and imports about 29% from the rest of the EU. According to Mr Read, the UK has something of a choice on strategy: to be a food grower or a food trader.
“To some extent it will be both, but the emphasis on one over the other will have a fundamental affect.
“What we grow and what we trade could change significantly after Brexit. It looks as if the Department for Environment, Food and Rural Affairs wants us to be more of a trading nation. But I don’t think the UK has had a food strategy for 40 years.”
Prices will go up, explained Mr Read, as Brexit will impact several key inflation criteria. As has already been seen, foreign exchange rates have a significant effect and the low pound has already added 2.5% to food inflation. Other impacts will be felt from labour and production costs, tariffs and the oil and energy markets.
The UK food sector is already in crisis, delegates heard.
A recent hike in the living wage, plus increased business rates have already threatened the industry. Labour is likely to be a significant issue too. Mr Read noted that coffee chain Pret A Manger employed staff of 110 different nationalities, with only one in 50 job applicants from the UK.
Maersk, meanwhile, said its biggest concern would be changing sourcing patterns.
“We see the biggest sourcing of perishables from Latin America, and there has been a slight increase since the referendum in June,” said Ireland country manager Simon Smith. “Perhaps the UK is already boosting its interest in trade there.
“We have a slight concern that China’s appetite for fresh fruit is growing and more carriers are going from Latin America to China, not to Europe. But the key moment will be to see what the UK does in terms of trade agreements and sourcing.”
He also noted that Irish meat exporters, a growing trade, would have to decide whether to ship directly to the EU or maintain the faster and cheaper – but in future cross-border – UK landbridge.
“Ireland is heavily dependent on the UK – and Brexit has pretty bleak consequences for Northern Ireland. I am sure ro-ro services between Ireland and the continent will be looked at.”
Mr Smith also urged the UK’s major ports to invest more in cool chain infrastructure – Maersk currently focuses its reefer operations on smaller ports at Cork, Tilbury and Portsmouth.
“Smaller ports have really been valuable, and things are developing at Liverpool and Bristol. But a lot of investment is needed at bigger ports for reefers.”
Mr Read summed up the divisiveness of Brexit by recounting that he had had dinner with several farmers the night before. One told him: “This is the dawn of a brilliant new age – the most exciting passage of British history.”
Another said: “This is the most calamitous moment we have faced as a nation since the Cuban missile crisis.”