Testing times
As this issue goes to press, there is only one question: deal or no deal?
At last, with at least three effec�ve vaccines against the coronavirus pandemic on the way, it seems hopeful that normal life will return gradually next year. However, one uncertainty has been immediately replaced by another: Brexit.
At the �me of wri�ng, every man, woman and dog in Britain is wai�ng to hear: deal or no deal.
The Brexit transi�on period ends at the stroke of midnight on 31 December 2020. With or without a deal, it will mean major change – but preparing for this without knowing what 1 January will bring has proved near-impossible. We asked Brexit experts in Scotland’s food and sector what this has meant for them – and they didn’t hold back.
Let’s begin big, with Scotland’s largest employer, the food and drink industry, accoun�ng for one in five manufacturing jobs, and worth £15 billion to the Sco�sh economy each year.
“Businesses simply are not prepared for Brexit, and that is through no fault of their own,” said John Davidson, strategy and external affairs director at trade associa�on Scotland Food & Drink.
With under a month to go, he said: “The way we import and export goods, bring in essen�al labour for our farms, factories and boardrooms, and manage the safety of our products will all change, and incredibly, we s�ll don’t know what the new rules will be.
“Tariffs, border disrup�on for high value perishable goods, and cer�fica�on costs are all far greater threats for the food and drink sector than they are for other sectors in the economy. So what the UK Government does in the next month is cri�cal to the survival of many food, drink, farming, fishing and seafood businesses and the supply chain and jobs they support.”
“Border disrup�on is a key concern for fish and seafood businesses,” he added. “Given the nature and value of the seafood supply chain, which operates on a just-in-�me model, it is vital that smooth transit con�nues in order to fulfil orders and retain customer confidence, especially in the face of current market disrup�on and fierce compe��on.
“We already know exports of salmon are down 25 per cent in the first six months of the year, and we expect this trend to con�nue for the remainder of 2020 and into next year as the world con�nues to fight the pandemic.
“Brexit will only exacerbate this challenge,
and we expect our seafood businesses to be par�cularly affected given that the EU is the des�na�on for 70 per cent of seafood exports. The majority of this operates on a just-in-�me supply chain model, meaning that any delays or disrup�on at the border could have significant adverse financial consequences.”
“For processors, access to labour is a big risk too. Many businesses are extremely reliant on labour from the EU, such as the North East [of Scotland] where more than 70 per cent of the workforce in seafood processing are EU na�onals.”
What would be the best, and worst, case scenario for the industry as a whole?
“A no deal will be disastrous for the Sco�sh food and drink sector,” he explained: “It is already facing a £3 billion hit from Coronavirus and the untold disrup�on of a no deal Brexit would undoubtedly sink some businesses. A no deal would decimate our seafood exports, for which the EU is the biggest market, and our red meat industry could face crippling tariffs.”
Earlier in November, Scotland Food & Drink joined other industry leaders including the Sco�sh Salmon Producers’ Organisa�on, the Sco�sh Seafood Associa�on and Seafood Scotland to call for four measures that would mi�gate the damages of Brexit.
They requested: a six-month “grace period” to allow any new trading rules to bed in and for businesses to adapt, a package of financial compensa�on to keep viable businesses afloat, finalise opera�onal arrangements for seafood consignments across the channel, and to add the food and drink sector to the Sco�sh Shortage Occupa�on List.
Could Brexit benefit the industry? “It remains to be seen whether Brexit will benefit our salmon and other food producers,” Davidson replied. “The prospect of tariffs and disrup�on at the border is deeply concerning. Whilst other new market opportuni�es could emerge in the future, trade deals and new substan�al markets could be some �me away. And then, even if market access is granted, it takes �me and significant investment to gain market penetra�on for Sco�sh products.”
Donna Fordyce, head of Seafood Scotland, the na�onal trade and marke�ng body for the Sco�sh seafood industry, said: “Scotland’s seafood companies are not currently preparing for a deal, because, quite simply, there isn’t one at present.”
“Instead, the sector as a whole is preparing for a no deal. If a deal does transpire before the transi�on period ends, then of course that will be a bonus, but with only weeks to go any agreement on a deal will be to a very �ght deadline.
“Many companies have put a lot of �me and effort into their Brexit arrangements and have got as far as they can, but there are s�ll so many unanswered ques�ons. Every �me businesses think they’ve figured out a solu�on to a Brexit issue, they pull back another layer and realise there’s more to think about.
“There is a wealth of informa�on and papers out there in a bid to provide some guidance, but it’s a lot to process. The Border Opera�ng Model, for example, is a 138 page document and for smaller companies in par�cular, who have spent the year firefigh�ng their way through the Covid crisis, there just hasn’t been the sufficient �me or resources
to get ready for Brexit, so I’m afraid to say many are feeling woefully unprepared.”
What are the sector’s main concerns? “Our main concern,” she replied, “is that despite companies pu�ng in huge amounts of effort to try to prepare as best they can for Brexit, ul�mately the systems required to facilitate it all will not have been tried and tested. This could lead to delays and chaos at the border. In the case of fresh or live seafood, any delays en route to market can impact the value of the product and it could end up that by the �me it reaches its EU des�na�on, the product is no longer financially viable.”
She added: “Transporters are mainly concerned about the addi�onal paperwork and poten�al blockages at the borders. Coming from Scotland we’ve also got the disadvantage of added distance, so considera�on also must be given to the legal number of hours that the drivers are permi�ed to work.
“Processors and smokers are deeply concerned about the poten�al tariffs. A�er years of encouraging the sector to add as much value as possible to its seafood via processing and smoking etc, it looks like the proposed tariffs are set to penalise this. This could force Sco�sh companies to essen�ally act as traders and truck out product unprocessed, leaving buyers in the EU to process/smoke the product in their own country, which would lead to a detrimental impact on factories and subsequently jobs in Scotland.
“Overall, the aquaculture sector is also concerned about the future of its workforce. EU na�onals account for around 56 per cent of employees overall in the sector… so there are fears around keeping those skills in Scotland without the freedom of movement of EU ci�zens.”
What is their best and worst case scenario? ‘The best scenario we could hope for would be a trade deal with no tariffs that would include a transi�on period to allow sufficient �me for all the processes required to be implemented,” she answered.
“For example, at the moment we don’t have enough environmental health officers to check off cer�fica�ons, we don’t have enough licences for the trucks to be able to travel into Europe, we don’t have enough heat treated pallets to actually get product into the EU, so we really need that addi�onal �me to work through all of these types of logis�cs. Without that safety net, we could poten�ally be looking at transport delays, leading to the spoiling and wastage of product which could ul�mately lead to trade temporarily hal�ng altogether.”
What benefits could Brexit bring to Scotland’s seafood industry?
Fordyce said: “Obviously one of the key benefits of Brexit will be that the catching sector won’t be subject to the same stringent quotas that are currently in EU legisla�on. The freshly enacted flagship Fisheries Bill means that the UK will have power over its fishing waters for the first �me since 1973. Taking back control of our own fishing waters has long been argued as one of the biggest benefits of Brexit and many of our fishing communi�es enthusias�cally agree. This could lead to a buoyed Bri�sh appe�te for Sco�sh caught fish.”
“Even if there is a deal with the EU and there are no or low tariffs, as an industry that has to ship much of its produce either live or incredibly fresh, we will have to deal with new bureaucracy which will be financially damaging. Catch cer�ficates, health cer�ficates and export forms, will all take up more �me and create added costs for businesses that already operate on �ght margins.
“There is no doubt that the months ahead will prove to be challenging for the seafood industry, but our team is ready with prac�cal help and advice to help the industry.”
The Brexit expert at the Sco�sh Salmon Producers’ Organisa�on (SSPO), Robbie Landsburgh, said: “They [fish farmers] are preparing similarly for both scenarios, as there won’t be a huge difference between the two in terms of paperwork and non-tariff barriers.”
“For tariffs, individual companies will need to prepare their own con�ngency strategies, but there will inevitably be concerns for them about cost implica�ons of tariffs as well as market compe��veness in the EU, though perhaps less so for fresh salmon. Given the lack of transport permits in a no-deal scenario, transport con�ngency planning is also a concern and there is work ongoing with hauliers on this.”
The best case scenario, he explained, would