As we all know the negotiation period for Article 50 is coming to an end and we are increasingly asked about how this could potentially impact our business. Unfortunately, without a clear direction of what Brexit may look like we can only speculate. I have listed some possible eventualities below, with input from our suppliers, the British government, Dairy UK and various other sources but as it stands this my best estimate.
This would see our current arrangement with the EU being ceased. This could potentially cause two issues; Issue one, an increased tariff (Farmers Guardian site 40-50% increase) on imported cheese goods from the EU (Italian Soft Cheeses, Parmesans, etc.). These increases will be passed on until a new trade agreement is set out. How quickly a trade agreement will be agreed with EU remains to be seen, and the detail of that agreement and how this could affect us is currently unknown.
This also applies to both sides, and some argue that it could be to our benefit in the long run. However, in the short term, I believe this will increase our pricing and in turn, impact you and your customers.
As we predominately deal in a fresh and chilled product, this eliminates the possibility of stockpiling and due to the independent nature of our family business, we don’t have the resources or the space to do this on a large scale.
Issues Two, Increased checks and paperwork at the border. Currently, we are free to import goods with very little border paperwork, but without a deal in place this paperwork could increase, causing a slow down at the borders and causing delays to products being delivered. The Head of Calais has assured us on several occasions they will be ready for a no deal Brexit. However, other industry experts have suggested that a small delay of 6 seconds will cause backlogs resulting in delayed deliveries. We are urging all our EU suppliers to prepare for this eventually, and most already deal with other nations that require similar paperwork. I am confident all our supplier’s paperwork will be in order. However, we cannot control the preparations of other importers from the EU. Although our suppliers will be prepared, the lorries in front of them may not be, leading to delays.
As far as we can tell, with the current deal that is on the table, we will enter a transition period until 2020 and all existing trade agreements will remain in place until 2020. The unknown, will be how the sterling reacts immediately when we know what the official trade deal looks like.
Extend Article 50
If extended, expect the same scenario as the last two years. The pound seems to be trading between 1.10-1.13 against the Euro. I don’t envision any immediate problems, until the nature of how we will leave the EU becomes evident.
Unfortunately another unknown, but we can speculate what that would look like. The ‘People’s Vote’ would likely have three options. Remain, leave with a deal, or leave with no deal. If we decide to remain, regular service will resume. Leave with a deal, either we would extend article 50 to ascertain another deal or accept Theresa May’s current deal. Then we will enter the transition period. Leave without a deal, then I refer you to the first paragraph, where we could experience price increases and border delays. Once again, all subject to opinion at this stage.
Once again, I stress this is the best-educated guess of what challenges our business could face, dependant on the outcome. We remain committed to great supplier relationships and independent British businesses and we have British alternatives for all products sourced from the EU. If pricing becomes untenable, we will be mobilising these suppliers.
Attached is the latest communication from Dairy UK regarding labelling rules, which gives you a small insight into the planning and preparation going on in the background.
If you would like more information, please give me a call, and I’ll be happy to explain my thought process in more detail.
Perry James Wakeman
(World Cheese Awards Judge, Certified MonS Affineur & Academy of Cheese Patron)