Complacency warning for food firms

Scotland’s food and drink industry must plan ahead to remain competitive after Brexit, a report has warned.

Professional services firm KPMG has urged businesses to prepare for the potential financial challenges of leaving the European Union.

Recent figures show food and drink exports grew by 11% year-on-year in the first quarter of 2017, generating sales of £1.2 billion.

However, Susan Dunlop, food and drink sector lead for KPMG in Scotland, said financial fluctuations and increased costs are having an impact on the industry.

“To ensure ambitious growth targets are met and Scotland strengthens its competitive position both in Europe and globally, the sector must identify and plan for anticipated financial challenges of leaving the EU.”

Ms Dunlop said Scottish food producers had to avoid complacency and be alive to opportunities in the market.

“In facing cost pressures head on, it is vital for companies to adopt more flexible thinking and continually assess business strategies, such as using alternative supplier partnership models or driving innovation and substituting raw materials,” Ms Dunlop said.

“The anticipated time to agree and implement new EU trading terms will also present a window of opportunity to consider potential scenarios and plan for these anticipated challenges and market trends in both the short and long term.

“Now is the time to consider any requirements to establish EU subsidiaries, apply for European regulatory licences, and run defensive scenarios to consider business resilience in the face of changing VAT or custom codes, reduced access to EU migrant workers, or increased costs of storage and warehousing overseas.

“As the sector continues to respond and adapt to both the challenges and opportunities of a Brexit decision, future winners will be those companies that have a resilient supply chain, a responsive strategy, and an excellent customer relationship.

“With our Global Change Readiness Index ranking the UK the 10th most ready for change, it appears business is keen to get itself Brexit ready.”

A worker at a Scottish fish farm. Salmon is one of Scotland’s key food categories.