While the eye-catching Mont des Arts clock struck midnight on New Year’s Day, 1973, two kilometres across town at the European Economic Community (EEC)’s headquarters, the Union Jack was raised.
The occasion? The UK had been formally admitted into the EEC, the forerunner to the European Union (EU). Of the accession, then-prime minister Edward Heath said: “From the point of view of our everyday lives, we will find there is a great cross-fertilisation of knowledge and information, not only in business, but in every other sphere.
“And this will enable us to be more efficient and more competitive in gaining more markets not only in Europe, but in the rest of the world.”
There have been a fair few bumps along the way since, with the UK remaining a part of the club all the while, but 2009’s Lisbon Treaty introduced an exit clause, throwing a bone to a growing number of Eurosceptics.
Those bones have recently grown into a pile, with Prime Minister David Cameron announcing that a referendum on whether Britain should remain in the EU will be held on 23 June 2016.
With ‘Brexit’ now becoming a very real possibility, what does this mean for the UK’s fresh produce industry?
One imagines that when most Brits – with a working knowledge of EU governance – think of what the EU does for British farmers, they recall the Common Agricultural Policy (CAP), which hands out two types of financial benefit: Pillar 1payments go directly to farmers, and are also used for market control measures, while Pillar 2 paymentsare deployed to promote rural development.
John Giles, agri-food director at farm consultancy Promar International, thinks that while a lot of British farmers are “very reliant” on Pillar 1 payments, the UK government could choose to phase out this scheme in the event of a British exit.
However, he notes: “You could also see it in the light that free from the CAP shackles, UK agriculture would become more competitive. When New Zealand removed subsidies, they did it fairly quickly, and while they went through some short-term pain, long-term it produced a more fit-for-purpose horticulture industry.”
Let’s return to what Heath said upon the UK entering the EEC; namely that joining the union would enable the UK to be “more efficient and more competitive in gaining more markets, not only in Europe but in the rest of the world.”
At a time when the likes of China and India are seeing explosive growth in the middle class tiers of their societies, and with the EU being the UK’s biggest trade partner, Brexit could prove to be a hammer blow for UK-based fresh produce suppliers who rely on trade deals set up on the continent, and who are also looking to take advantage of opportunities opening up in new markets on the other side of the globe. And with these issues in mind, two bosses of leading UK fresh produce businesses have major concerns about what a British exit could mean for our industry.
John Shropshire, G’s Group chairman, says: “As a farmer and food processor operating across Europe, an exit would be a leap into the unknown for me, and for farming generally. The single market has been one of the greatest economic innovations in UK history.
“Leaving the single market, the UK would be isolated by tariffs and in limbo, negotiating trade deals. Yet leaving the EU, and remaining in the single market with no say in how it runs, begs the question, ‘why bother leaving in the first place?’”
Tim O’Malley, group managing director at Nationwide Produce, says that the EU, taken as a whole, is the UK’s major trading partner by some margin. The UK reportedly exports 45 per cent of its goods and services to the EU, and imports 53 per cent from the EU.
O’Malley raises what he believes to be some of the key questions surrounding the debate: “Can Britain leave the EU and retain full access to the single market? Will foreign investors leave for the continent? Why assume America, India and other big economies will greet our independence with offers to trade? Why vote for this level of uncertainty? And that’s a key word in this debate – uncertainty. Business and the global markets do not like uncertainty. Look at what’s happened to the pound in just the last few weeks since the date for the vote was announced. It’s a clear sign that business is against Brexit.”
O’Malley describes Nationwide Produce – which has featured in both editions of the FPJ Big 50 Companies – as a “proudly European business”.
With offices and packhouses throughout England, Northern Ireland, the Netherlands and Spain, 21 per cent of Nationwide’s sales are “non-UK”, and 94 per cent of these sales are to the EU.
Even mere Brexit speculation has already had an impact on Nationwide: “The annual running costs of our businesses in Holland and Spain is around €2.1 million,” O’Malley explains. “Just over the last couple of months, the euro has dropped around 7.5 per cent against the pound as a result of various factors, but mainly uncertainty about the result of the EU referendum. The annualised direct cost of this for us is £123,000. For many other UK firms in our industry, that figure will run into millions.”
As well as costs such as that one, trade tariffs implemented in the wake of a UK exit would also likely prove to be a pain in the proverbial. Shropshire says: “The EU’s average tariff for agricultural produce is 12 per cent. A trade deal would need to be negotiated immediately. Yet Britain would be a junior partner to a European giant, rather than an equal member in the union.”
Another concern for the fresh produce industry in the event of a Brexit is the impact on labour supply.
O’Malley says: “We employ about 60 staff in our Lincolnshire packhouse. We joke that the only jobs we can get Brits to take are those involving sitting on their backside, such as forklift drivers. But sadly, it’s true. Around 90 per cent of our packhouse staff are eastern European, and 90 per cent of them are hard-working, punctual, honest and reliable. This issue of simply not being able to find Brits to fill this industry’s low-skilled jobs will only deepen as we head towards the new National Living Wage.
“If we vote to leave the EU this could lead to restrictions on the free movement of people around the EU, which would be a disaster for this industry.”
John Hardman, director at workforce supplier HOPS Labour Solutions, is less concerned about the ramifications for the fresh produce industry on this front: “As a past SAWS multiple operator, [a British exit] may be beneficial to HOPS, as it’s likely that new work permit schemes may need to be reintroduced by the Home Office,” he says.
He adds: “Short term, it’s unlikely labour supply would just dry up. But, as the Brexit terms relating to seasonal labour are unclear, there’d probably be a negotiated cooling off period in regard to migrant seasonal labour.”
At a time when groups of countries are organising themselves into economic blocs, the UK stands on the verge of pulling out of the biggest. While we can never know for sure how a UK exit would work for this industry until it actually happens, most fresh produce suppliers are coming out as anti-Brexit. Even if only short-term pain is experienced, at a time when suppliers already face an array of competing pressures, this could prove costly for some fresh produce firms.
Fruit and veg consumers could be in for a shock too. Colin Galbraith, sales and marketing director at fresh produce importer and exporter Moorhouse and Mohan, says: “The downside [to a Brexit] comes if pressures are made to impose protectionist tariffs either by organisations such as the NFU in the UK, using nationalistic spin, or vice versa in the EU, where agricultural interests team up to protect their markets and impose massive tariff rises. That will effectively raise the overall cost of produce to the consumer on imported produce, which cannot necessarily all be produced here, and those products which have been exported over the past few years – mostly roots and brassicas – could be cut off at the knees.”
Galbraith doesn’t think a Brexit would be wholly negative for the sector, though. He says: “As supposedly skilled importers and exporters, Brexit may be considered a benefit. Those who are used to importing and exporting from outside the EU are well versed in the ways of logistics, and enabling goods to travel without delay and problem.
“Those who have no experience and who never deal outside of the EU will have to learn these skills of a marketplace which requires greater skill. It may in fact enhance the levels of education required, and thus overall benefit the professionalism of the fruit and vegetable industry.”
Where farming fits into the debate set to grip the UK over the next few months is unclear, but it’ll likely be on the periphery. As
Giles notes: “Agriculture makes up about one per cent of the UK economy. So in any debate, we may not be the key issue, and what’s good or bad for agriculture may not be seen in the same light by other sectors.”
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