Food and drinks trade gap jumps as input prices rise

But whisky and salmon overseas sales help UK exports to a record £10.2bn

By The slide in the value of sterling has triggered a sharp deterioration in Britain’s food and drink trade deficit despite Scotch whisky and salmon sales helping exports hit a record high.

The Food & Drink Federation (FDF) said yesterday that theweakerpoundhadramped up input prices, causing the trade deficit to rise 16 per cent to minus £12.4 billion in the first six months of 2017.

“The continued weakness of sterling is a concern,” Ian Wright, director general of the FDF, said.

Yesterday’s report said: “While the fall in the price of the pound had helped to boost UK export competitiveness, this currency weakness has also led to an increase in the cost of many essential imported ingredients and raw materials.”

Sterling is currently trading down 16 per cent against the euro and 14 per cent against the US dollar compared with just before the Brexit vote in June last year.

More positively, foreign demand for Scotch whisky, salmon and beer in particular lifted UK exports of food and drink 8.5 per cent in value to a record first-half high of £10.2bn.

Salmon exports were up 53 per cent by value to £408 million and up 24 per cent by volume. While Scotch whisky export volumes fell 1 per cent, they rose 3.7 per cent by value to £1.82bn.

Food and drink is the UK’S biggest manufacturing sector, with Scotch whisky accounting for about one-quarter of its overall exports.

Wright hailed the growth of food and alcoholic drink exports as “very encouraging”, as the weakness of the pound since the EU referendum vote has made UK exports cheaper overseas.

Exports to the EU27 – the remaining countries in the single market when Britain leaves – grew at a faster rate than to non-eu markets, boosting the share of food and drink sector sales to the bloc to 61 per cent.

The FDF chief added: “It is great to see such strong growth in our exports to EU Member States. The EU remains an essential market for UK exports as well as for supplies of key ingredients and raw materials used by our industry.

“We believe there are significant opportunities to grow our sector’s exports further still.”

Britain’s top three food and drink export markets were Ireland, France and the United States, the report said.

The three export markets that saw the greatest growth in value in the first half of this year were South Korea (up 77 per cent), China (+35 per cent) and Belgium (+39 per cent).

UK food minister George Eustice said the strong exports performance “show that the UK’S high quality foods and high standards are sought after around the world”.

A recent report by accountancygroupgrantthorntonfor the trade body identified China, India and the United Arab Emirates as the leading three markets that UK food and drink makers want to target.

mflanagan@scotsman.com