The general industry wisdom is that post-Brexit, farmers around the United Kingdom will need to “up their game,” regardless of what deal with the rest of Europe we end up with. There is the strong likelihood of reduced Pillar I (production) & II (environmental) support payments at some stage in the future. This was always going to be the case, post the next round of EU Common Agricultural Policy (CAP) discussions, regardless of the decision to Brexit.
The U.K. fruit and vegetable sector has historically been subject to a relatively “light touch regime” in terms of industry support. The relative lack of support for the U.K. horticultural sector has produced a situation where it has already gone through a substantial period of change in the past 10 to 20 years.
Under some possible Brexit scenarios, domestic prices might rise; U.K. producers should take the opportunity to increase production. The U.K. market is dominated, in most cases, by sales to the leading supermarkets. Growers who are in groups or organizations closely linked to these supply chains will be in the best position to prosper.
It will be the slightly larger units and the high performers who fare best of all. Being a low performer will inevitably be a difficult position to be in for the mid- to long term. Part-time and smaller farms will most likely earn their living by supplying niche markets, such as box schemes, farmers markets, farm gate sales, etc. As such, there will be a further polarization of the producer base between small and part-time farms and the larger, more commercially driven units of production that are focused on supplying a relatively small number of key supermarket customers.
The real outcome of Brexit might be to see an acceleration of the trends we have seen in the past 10 years.
U.K. supermarkets are keen to promote the “Britishness” of the produce they sell and will continue to provide this support to growers. Growers will still need to adhere to well-established production and accreditation standards. U.K. supermarkets are unlikely to lower technical and commercial demands made on growers in areas such as traceability and sustainability, and being able to supply on a year-round basis at competitive prices. In effect, the big will probably have to get bigger in order to make the future investments required.
A rise in the level of domestic prices doesn’t mean growers should not look to control costs, engage in benchmarking schemes and carry on investing in new varieties, some of which might be grown only for specific customers. Investment in logistics, cool stores and packing facilities will be an ongoing requirement.
Production will tend to further concentrate in the existing strongholds of U.K. horticulture, such as Kent, Lincolnshire and Worcestershire. Labor is a key issue for the horticultural sector and will continue to be an area of major focus. Most U.K. units are dependent on the use of labor from the EU and other parts of the world for picking and packing operations. The larger the unit of production, the more acute the issue becomes. Post-Brexit, there are likely to be more controls on the labor movement. This could be to the detriment of the horticultural sector.
Growers will have to do one of two things: either attract more indigenous labor to the farm — but on past evidence this looks extremely unlikely — or look at how picking and packing functions might be automated to reduce the dependence on manual labor.
For some of the growing organizations that have developed joint ventures or their own growing operations outside the U.K., the solution would be to increase production in these operations — especially for commodity varieties — and concentrate U.K.-based production of more niche and higher value varieties on scaled-back growing operations.
Growers and the supply chains they operate within will need to be looking at additional ways of increasing efficiency while reducing cost. Aside from looking at labor-related issues, focusing on reducing produce waste at all stages of the supply chain, improved crop production planning, better and more efficient use of inputs and making better use of climate-related data to produce a more streamlined supply chain will be important.
In other scenarios, the U.K. market might be open to more import competition. The U.K. is already a net importer of fresh produce. This would only intensify the overall market environment and may offer more opportunities for U.S. growers and exporters of products such as apples, grapes, pears and berries, depending on the new trade agreements with the United States and other countries of supply.
Whether the U.K. is heading for a hard or soft Brexit is still unknown. In the next six months, however, it will gradually become clearer. Regardless, the U.K. horticultural sector will need to “up its game.” The real outcome of Brexit might be to see an acceleration of the trends we have seen in the past 10 years. Labor might be the biggest issue of all to contend with. It promises to be a period of further change for the U.K. horticultural sector, but for the forward-looking and well prepared, it will also be a time of opportunity.
John Giles is a divisional director with Promar International, the value chain consulting arm of Genus plc. He has worked on fresh produce assignments in more than 50 countries around the world, including the United Kingdom, European Union, United States, Central and Latin America and the Far East. He is the current chair of the Food, Drink & Agriculture Group of the Chartered Institute of Marketing. Giles can be reached at: [email protected]