Food and Drink Federation – Supplementary Written Evidence (TIG0016)

Following FDF’s appearance at the committee session, FDF committed to providing the supplementary written evidence on the data we cited and a number of proposals we pressed for the UK and EU to come to an agreement on to facilitate trade:

1. Trade data and FDF member surveys

We highlighted the impact the TCA has had to trade in food and drink using data collect. These can be found below.

We also share a number of surveys we have collected since the beginning of the year to accompany this document. These include a survey on the impact of the TCA and a survey on the Northern Ireland Protocol.

a)    Exports of food and drink to the EU

b)    Imports of food and drink to the UK

c)     Exports of food and drink product categories to the EU

2. Negotiated steps the UK should take:

At the committee I mentioned two areas we would suggest the Government should pursue an agreement with the EU:

a)    SPS agreement

Firstly, we believe an agreement in sanitary and phytosanitary (SPS) equivalence area would be beneficial. Whilst much of the benefits mentioned by commentators focus on the reduction of physical checks, it would also simplify the Export Health Certificates (EHCs) and process of getting them signed by the relevant officials. For example, the agreement between the EU and New Zealand provides for simpler certification, and allows the official to sign the consignment on the basis that it meets the exporters own legislation, rather than the importers legislation. This is due to the agreement deeming each parties SPS rules as equivalent to the others:

An example of the EHC to send a product of animal origin from New Zealand to UK/EU - https://www.legislation.gov.uk/eudn/2015/1901/annex/I

Current EHC that is required for diary products to be sent form the UK to the EU - https://assets.publishing.service.gov.uk/media/5f68974b8fa8f51064e88acf/Specimen-8287_Milk-RMP.pdf

b)    Sweden/Norway Customs border

Secondly, a welcome step the Government could take to negotiate with the EU, or relevant member states, would be to pilot or replicate at roll-on roll-off crossings the customs model that applies across the Norway and Sweden border. This allows for a single customs office, that reduces the customs requirement and declarations into a single submission of a customs declaration (rather than both an export and import declaration, as well as entry and exit summary declarations) and that is policed by both the Norway and Swedish customs officials, and both sides are able share data and assess the risk more effectively.

This would greatly reduce the customs documentation required, and reduce the data duplication that currently exists on the import and export declaration.

FDF Trade Survey: Northern Ireland Protocol

FDF carried out a survey between 4 October and 19 October to gauge impacts of the Northern Ireland Protocol. We received 83 responses from businesses representing all sub-sectors of our industry.

Trade with Northern Ireland

We asked about how volumes of goods companies in Great Britain (GB) send to Northern Ireland (NI) has changed since 1 January 2021.

Some businesses have maintained previous flows of goods since 1 January, however on average businesses reported a significant decrease in their sales from GB into NI. Small businesses have faced the largest drop in sales, while large businesses that would make up the majority of the volume of products sold into NI have seen a drop in trade of 10%.

If the current grace periods for GB-NI trade end and goods face the EU’s full import requirements, a large share of businesses would stop supplying NI, either permanently or temporarily while they assess if it remains a viable market. Nearly half would have to raise prices, while more than a third would reduce the number of product lines they sell into NI.

We asked if these changes were likely to be permanent or temporary. Nearly half indicated that this would be a permanent change, while a further third don’t know at this stage.

We asked businesses to estimate how their sales into NI would be impacted if the grace periods end and full EU customs and SPS requirements are applied to goods moving from GB into NI. On average, the volume sold would fall by a third.

Which product categories would be most negatively impacted?

1. Raw materials and ingredients
2. Composite products
3. Fish
4. Organics
5. Meat products

Trade with the Republic of Ireland

Food and drink supply chains are deeply integrated between NI and GB. Lessons that have been learned since the start of the year as businesses adapt to the new trading relationship with the EU cannot simply be applied to GB-NI trade if faced with full EU import controls.

However, given similar consumer preferences and levels of integration, we can look to impacts on trade between GB and the Republic of Ireland, where businesses report sales having dropped by more than a fifth.

Having traded with ROI since 1 January 2021 under full EU customs and SPS rules, nearly a fifth of businesses are now more confident that they would be able to adapt and supply NI if the grace periods end. However, more than a third are now less confident.

Has your experience of supplying into ROI made you more or less confident that you can supply NI if the grace periods end?

The three biggest challenges food and drink businesses have faced trading with ROI:

1. Customs processes
2. Customer readiness
3. SPS processes

FDF Trade Survey: February 2021

FDF carried out a survey between 19 February and 1 March to gauge impacts on the UK’s trade in food and drink since the end of the transition period on 1 January 2021. We received 74 responses from businesses representing all sub-sectors of our industry.

The five biggest challenges identified by food and drink businesses when trading with the EU are:

6. Adapting to new customs processes
7. Rules of origin and tariffs
8. Inconsistency at EU borders
9. Documentary/ID checks at borders
10.                     Customer readiness

While some businesses have been able to maintain previous flows of goods since 1 January, on average businesses reported that they have seen a significant decrease in the volumes of goods they are moving to the EU, Republic of Ireland and Northern Ireland.

We asked whether the impacts outlined above are likely to be temporary or permanent. In each case, around 45% of businesses believe these impacts to be temporary, whereas for between 20%-31% these impacts are permanent. Around a third do not know whether this lost trade with the EU, Republic of Ireland and Northern Ireland will recover.

The use of groupage distribution typically by smaller businesses moving food and drink to the EU where their goods are combined in lorries/containers with cargo from other businesses presents continued difficulties.

More than two thirds of businesses face consistent delays and problems delivering to the EU and around 10% say most of their shipments are not reaching EU customers. Without practical solutions to the implementation of the UK-EU Trade and Cooperation Agreement (TCA), we believe small businesses in the EU will face these same difficulties supplying into the UK when the UK’s Border Operating Model is fully operational in July.

What has been your experience of moving goods to the EU using groupage since the end of the transition period? (Responses only from those using groupage)

The experience of supplying food and drink into the Republic of Ireland has made nearly two thirds of businesses less confident that they will be able to continue supplying goods into Northern Ireland when existing grace periods end in April. Only 2% are more confident.

Has your experience of supplying into ROI made you more or less confident that you can supply into Northern Ireland when the grace periods end in April?

If these grace periods end in April and goods moving from Great Britain into Northern Ireland face the EU’s full import requirements, nearly half of businesses indicate they would pause or stop delivering directly into Northern Ireland.

If the grace periods for selling into NI end and trade reverts to full EU requirements in April, how will you respond?

Looking ahead to the changes that will apply after the second and third phases of the UK’s Border Operating Model are implemented in April and July 2021, businesses are most confident in their own preparations and those of their customs agents. However, a majority are not confident in the preparedness of:

• groupage distribution to deliver continued EU-UK movements;
• EU suppliers;
• EU Member States (including Official Veterinarians);
• UK Government IT systems; and
• UK port infrastructure and port authorities successfully managing increased checks.

How confident are you that the below will be fully prepared for changes to the UK's Border Operating Model in April and July that will apply to imports from the EU?