UK and EU produce companies play down short-term Brexit impacts
![UK and EU produce companies play down short-term Brexit impacts UK and EU produce companies play down short-term Brexit impacts](https://cdn.freshfruitportal.com/2016/07/Flag_-_Union_Flag-1.jpg)
With a little more than a week having now passed since the U.K.'s decision to leave the European Union, produce companies remain alert but do not foresee dramatic changes to trade or grocery prices in the near future.
In an historic referendum on June 23 British citizens voted 52-48 to leave the trade bloc, leading the pound sterling to fall significantly against the U.S. dollar and Prime Minister David Cameron to say he will resign by October.
While the U.K. will not leave the EU until two years after it formally notifies Brussels of its decision through triggering Article 50 of the Lisbon Treaty, one of the most immediate concerns in the produce industry is currency fluctuations and their dynamics on trade.
Here at www.freshfruitportal.com we spoke with a British importer, a consumer insight panel, and a Dutch exporter with business in the U.K. to get their take on the current situation and what the future implications might be.
Knock-on effects for U.K. importers
The head of Jem Fruits, which imports from the likes of South Africa, Latin America and Mediterranean countries, said the dramatic devaluation of the pound in recent days would inevitably push costs up, but consumers would likely not see price rises in the short-term.
"The U.S. dollar's gone from 1.45 to 1.33, and as much as you might have forward coverage on certain things it does has a knock-on effect, not just on the product but on freight," company owner Edward Fleming said.
"Obviously if you’re importing from the eurozone that’s got a smaller knock-on effect because the shock level hasn’t been as high as the dollar."
He said if the currency didn't recover, supplies of certain produce items in the U.K. may eventually drop as prices rise.
"It’s a natural process, but it’s one in the fruit trade that we learn to live with. It’s a volatile business," he said.
In the coming months he expects to see a 'guarded reaction' to price rises.
"What will happen is the supermarkets will put pressure on the supplies to put prices at a similar level because of competition," he said.
Fleming also pointed out that if the pound remained weak, it could further increase competition for U.K. produce importers as shippers look to more lucrative markets.
Groceries resilient to economic turmoil
Meanwhile, the head of consumer insight at Kantar World Panel believed supermarket produce volumes were unlikely to take a hit.
"The last time there was any economic trouble back in 2008 and for the few years afterwards what we saw was that supermarket volumes were amazingly resilient," Fraser McKevitt said.
"It is a sector where it’s not discretionary purchases, people continue to want to feed themselves no matter what’s happening in the economy. So I wouldn’t expect any major turn away from people buying groceries in general and fruit and vegetables in particular."
He added if the economic problems were to continue for a while, prices for consumers could move back upwards, having been in decline over the last couple of years.
"For about two years the prices have been falling on a like-for-like basis, with grocery deflation currently running at 1.4% negative. That is the result of both of commodity pricing and the supermarket price war," McKevitt said.
"For many goods, if the cost of importing were to go up by say 5% or 10% it wouldn’t have too much of a bearing on the final cost because there are so many things that go in to manufactured goods, but produce is a little bit more exposed so it’s one of the first categories that we would expect to see price rises on."
He predicted price increases could mean consumers buying more groceries from discount supermarkets, but did not expect any 'massive shocks' in the immediate future.
'No short-term complications' for Dutch shipper
Over in continental Europe, Netherlands-based produce supplier Cool Fresh International said there were 'no major issues' in the short-term, but is keeping a close eye on developments.
"We will just keep servicing our clients in the best way possible, and we ourselves don’t see any short-term complications," marketing manager Nick Jooste said.
"The things which are uncertain are what’s going to happen to the currency and how much fluctuation there will be. It seems to be pretty stable at the moment but you never know with politics."
Given the uncertainty, the organization is now thinking about all the potential future scenarios that could play out.
"We’ve been thinking about what if the pound goes down to the level of the euro? I’m not saying it will, but what if?" he said.
"What about growers from South Africa and Latin America - would they be prepared to keep on serving clients in the U.K. with the high quality standards and high costs?
"If they had to have a choice between going into the U.K and going into Europe, which is a bit more forgiving and a bit easier to work with in terms of standards, what would they do? If they decide to go into the European market in a substantial manner, what would happen to the price levels on our side?"
But he emphasized that given none of these variables could be accurately predicted, the company's stand-point was not to make 'too much of a huff and puff' about it.
"Obviously in due course if this whole thing starts being formalized what happens for instance to documentation, what happens to cross-border controls? Does it become more difficult? Will they find solutions?" he said.
"Those are the things that we really don’t want to worry about at this point in time."
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