What Does the UK’s Shocking Brexit Vote Mean for the Future of the Food Industry, and Scotch Whisky?
Britain’s referendum on whether it would remain a member of the European Union — a historic vote also known as Brexit — passed yesterday, with approximately 52 percent of Britons voting “leave.”
The move was shocking to many and was not supported by the UK’s own prime minister, David Cameron, or a number of world leaders including President Obama, who had expressed hope for “a different outcome.” In the wake of the vote, Cameron announced that he would resign.
More than 30 million people showed up at the polls to vote, with the majority of England and Wales voting in favor of Brexit, and the majority of Scotland and Northern Ireland voting “remain.”
It would appear that many Brits have yet to grasp the full extent of their decision. According to Google Trends, the top two EU-related questions searched in the UK since the referendum results were announced are “What does it mean to leave the EU?” and “What is the EU?”
Though the vote is not yet legally binding and the complicated withdrawal process is likely to take several years, the move effectively removes Britain as a member of the 28-nation European Union, a union of politically and economically collaborative member states. The EU has its own currency, the euro, though it is not used by the UK, as well as its own legislative body, the European Parliament.
A critical component of EU membership is the use of a single market, which allows the free movement of citizens, goods and services, and capital amongst member states, enabling people in EU countries to work anywhere in the EU. For Britain’s big businesses, including 70 percent of those within the British Food and Drink Federation (FDF), the single market was the biggest factor in the vote to remain.
Once the terms of Britain’s withdrawal are worked out, the UK could theoretically remain a member of the single market — though Martin Schulz, president of the European Parliament, has promised that the UK will not be permitted to rejoin the single market. “Leave is leave,” Schulz said. “The UK just decided to leave the European Parliament and that means also the single market of the European Union. I wonder whether this is a rational decision. It is an emotional one.”
In a statement signed by Schulz and other EU leaders, the UK has been urged to “give effect to this decision of the British people as soon as possible.”
Already, Britain has begun to feel the economic impact of its majority decision. In the hours since the results were announced, the British pound fell to its lowest value since 1985.
As for the British and European food and drink industries, the full impact of withdrawal from the EU’s market — which will undoubtedly bring new tariffs and trade issues — is difficult to quantify. “For businesses in the UK who import from or export to the EU or are part of an EU corporate group, this uncertainty means that planning is very difficult, if not impossible, a spokesman from the British law firm Eversheds told FoodNavigator. The UK will have to establish new trading agreements with each individual country from which it imports or exports supplies, and battle new restrictions. On the whole, Britain’s food industry is worth roughly £11 billion pounds a year, or $15 billion USD.
Ironically, some of Britain’s most beloved national foods, like Scotch whisky, Cornish pastries, and Stilton cheese, were protected under the EU’s Protected Designation of Origin. Without EU protection, these lucrative regional labels may be up for grabs by any imitators. The UK currently has at least 73 such native foods, including Cheddar cheese and Melton Mowbray pork pies. Even before the Brexit decision, experts warned that the world was running low on single malt whisky, and the UK’s new unprotected status could jeopardize the value of what true single malt remains.
Certain food sectors, including confectionary and ready-made products, are expected to be hit especially hard by new trade and manufacturing rules that follow Brexit. According to Euromonitor, snack items like candy, snack bars, biscuits, and chips — of which UK consumers are the second-largest buying group behind only Belgium — will be subject to the most regulatory concerns.
The vote also means that British farmers will not be subject to the EU’s stringent approach to pesticides like glyphosate — which is facing a potential ban across the whole union, and is already banned by select individual countries. Glyphosate is the most commonly used pesticide in the UK, and as of late April, 58 percent of farmers favored leaving the UK. One study suggests, however, that without agricultural subsidies provided by the EU, only the top 10 percent most efficient farmers would be able to survive without free access to EU labor and markets.
For the British restaurant industry, the UK’s withdrawal is likely to affect the hospitality workforce as a whole, although the scope of the vote is, again, unclear. Like the U.S., a significant portion (roughly a third) of those working in the restaurant industry were not born in the UK, and those workers, including European migrants willing to work for lower wages, will not have the same freedom to work and live in Britain.
Meanwhile, restauranteurs also fear that Brexit will affect tourism from citizens of the EU, who may have a harder time visiting, and for whom the nation’s membership withdrawal leaves a bad taste.
Assuming that Brexit does pass — Parliament still has to vote on the decision — just about every single food sector will see some kind of shift. As a member, the UK was the second largest economy in the EU, behind Germany, and contributed to 35 percent of its growth between 2010 and 2015.
Even grocery shopping will be different — a weak British pound coupled with supply chain difficulties will mean higher prices for consumers, according to former executives of major British supermarkets like Tesco, Sainsbury’s, and Asda.
“Leaving the EU will give ordinary British families a worse deal for years to come,” Richard Lloyd, a former executive director for the UK consumer group Which?, told the BBC.