08 Dec 2017 --- After months of negotiations and what looked like a continuing impasse, finally the UK government and EU have declared a “Brexit breakthrough” having reached a last-minute deal on key points, including the fact there will be no “hard border” in Ireland. For food and beverage industries, the Northern Ireland border is one of the key points that could impact trade and so companies have been closely monitoring Brexit talks for months, hoping that a “hard border” will be avoided.
Now it looks like that will be the case.
EU citizens in Britain, and UK citizens in the EU will also see their rights protected. Following the breakthrough, there can now be further discussion on post-Brexit trade between the UK and EU.
Today’s guarantee that there will be "no hard border" between Northern Ireland and the Republic maintaining "constitutional and economic integrity of the United Kingdom," will come as welcome relief for many businesses.
Meanwhile, Food & Drink Federation (FDF) director General Ian Wright CBE welcomes this morning’s news that the European Commission is to recommend to the European Council that Brexit talks should now proceed to stage two.
“We look forward to seeing the detail of what has been agreed on citizens’ rights and on the border between Northern Ireland and the Republic of Ireland; both issues of critical concern to food and drink manufacturing,” he said. “Time remains desperately short. We call for swift progress not only on future trade relations between the UK and EU but most importantly on the detail of a transition period. This must maintain the status quo so businesses have the certainty they need.”
One company that is watching closely is Ornua – formerly The Irish Dairy Board – which accounts for 60 percent of primary Irish dairy exports, employing 2,000 staff in 20 operations. The dairy cooperative has core markets of the US, UK & Germany and is strongly developing in Africa, China, the Middle East and Saudi Arabia.
Ornua’s business is comprised of two pisions: Ornua Foods and Ornua Ingredients. Ornua Foods is responsible for the international marketing and sales of Ornua’s consumer brands, including Kerrygold, Dubliner, Pilgrims Choice, Shannongold, Forto and BEO milk powder brands.
CEO of Ingredients Europe, Bernard Condon speaks with The World of Food Ingredients (December 2017) about contingency plans for Brexit.
“For us, Brexit is a very significant challenge and certainly the business already has contingency plans in place around managing Brexit impact. The big problem for us and the dairy industry as a whole is not really knowing what Brexit looks like. You could make very significant investments now to mitigate against the potential impact of the hardest of Brexits, but if that doesn’t materialize that would have been wasted,” Condon says.
“Similarly, we could do nothing and then the hardest of Brexits materializes and we are ill-prepared. So what we are looking for most of all when we are speaking to our politicians, is more certainty. As an industry, we have shown that we are very flexible and can adjust to any scenario, once we have some security around what that scenario looks like. Obviously for us, the softer the Brexit the better, because we have very close trading relationships that we want to maintain.”
Condon explains how Ornua has an internal Brexit Working Group that is looking at all the eventual scenarios.
Even though today’s Brexit breakthrough goes some way to mitigate the uncertainty Condon and many other businesses around the UK and Europe have been feeling, there is still a long way to go before all concerns are allayed.
“The currency risk is one we have watched and something that we need to be conscious of. We are obviously concerned about our facilities in the UK and that is from two perspectives. At the moment some of them are quite reliant on input from Ireland and how that trade will be impacted. On the other hand, we are also concerned about the availability of labor like most other businesses that are active in the UK, immigrant labor is a high proportion of the total labor pool,” he continues.
“Certainly, under a harder Brexit scenario, the availability of that labor would potentially become an issue, as well as the cost of it. So that would impact domestic businesses as much as it impacts ours.”
“In terms of a hedge, we are currently the biggest buyer of British cheese, and we have sufficient British cheese to maintain supply to our customer partners, but we would still ideally like a healthy trading relationship to be maintained with the UK.”
Paving the way for trade talks The UK Government wants to move onto trade talks, and in particular opening discussions on the possibility of a new free trade deal, as quickly as possible as the clock counts down to March 2019 when Britain leaves the EU.
However, the EU would only agree to discuss trade after enough progress had been made on the Northern Ireland border, expat rights and the all-important financial settlement, that is what price the UK will pay to leave the Union.
Now that progress is being made, the focus will likely shift into trade and the opportunities and challenges that presents.
For Ornua, the real issue isn’t necessarily about Brexit leading to trading opportunities with continental Europe, but how the business could persify its products and markets to better cope with any potential change to its trading position. However, uncertainty plays a major part in how the company is able to handle these aspects at this stage.
“The real issue for Ireland Inc. when it comes to dairy is that we produce so much cheddar. When you look across Europe, the UK is the only country that consumes cheddar. So if we are going to target continental Europe, it will not be cheddar that enables us to do that,” Condon adds.
“It is again down to this uncertainty. If we knew that our trading position was going to be seriously negatively impacted, I think there is a whole investment strategy at primary processing level that would be required to shift our production from cheddar into products that the continental market would be more inclined to consume.”
“If we can persify the range of products that we produce and the markets that we target, that would be prudent and is obviously something that we are looking at.”
By Gaynor Selby
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