The insight of Dr Richard North

Brexit will have an enormous impact on society and the economy here in the UK and the fall-out will also affect other countries, especially Ireland. The outcome of the current negotiations will be absolutely critical in determining what actually happens. The real difficulty for most people is that it is extremely difficult to understand the issues and the options open to the UK Government. One of the few individuals who has detailed insight into the legislation and processes is my long-time colleague Dr Richard North. Remarkably he produces a blog every day. Each one is the result of thorough research into a wide range of primary and other sources. Unlike the vast majority of journalists, commentators and politicians he has put in the hard labour to obtain the knowledge so that he can write and speak with authority. Although Richard has been pro-Brexit for many years, it is significant that he is highly critical of the approach currently being adopted by the UK Government. This blog calls heavily on Richard’s work and for anyone interested in getting to grips with the complications of Brexit, I strongly recommend frequent visits to his blog (1).

Third country status

One of the undoubted benefits of EU membership is access to the Single Market (SM). This means that trade between the various countries in the EU is facilitated because of the elimination of various checks when crossing the frontiers between Member States. Once the UK leaves the EU it becomes a “third country”, which means it will no longer be in the SM. As a result there will inevitably be the re-introduction of checks for goods entering and leaving the EU. As Richard has advocated, this fundamental problem could have been surmounted if the UK Government had opted to join the European Free Trade Area (EFTA), which would have allowed continued access to the SM. It seems unbelievable that the Prime Minister ruled out this option. So all the indications are the UK has to face up to the consequences of third country status. Even if there is a change of heart as the nasty implications of this are eventually realised, there is no guarantee that an application to join EFTA would be acceptable to the existing members.

Food shortages

In his blog of 18th July 2017 (2), Richard highlights the implications for the food supply. Here is his opening paragraph:

“As near as can be certain, on exit day – 29 March 2019 – UK exports of food to EU member states are going to stop. This is not a matter for negotiation and nor can it be avoided. It is an inevitable consequence of the UK leaving the Single Market and becoming a “third country”.”

Obviously this is bad news for any agriculture or food business that is involved in exporting. However with respect to imports he continues:

“What happens to food imports from the EU is not so certain. This depends on whether conditions are imposed by the UK government which must be satisfied before consignments are allowed entry to our territory. And the intentions of the government in this respect are as yet unclear.”

The fundamental problem is that there are nothing like the facilities available at the ports and airports not only in the UK but also in the EU countries such as France to conduct the veterinary and other specialist checks as well as the customs formalities. So even if the UK authorities managed to gear up to these demands, and there is no indication that the necessary plans are in place, we can be certain that the EU will not be able to cope. Furthermore there will no pressure to do so in France and other EU Member States.

Richard concludes:

“Bearing in mind that close-on 40 percent of our food currently comes from the Continent, if that supply chain is disrupted, we could have serious shortages, particularly in fresh foods. We would be confronting the very real possibility of empty supermarket shelves and people going hungry.”(2)

Even if these problems are eventually solved, the fact remains that these changes will play havoc with the transport arrangements. The inevitable result will be increases in prices with the possibility that much of the trade is unable to continue thereby restricting the choices available in the shops.

Impact on businesses

Although the choice and cost of food will be altered in a big way, the effect on food business will be equally dramatic. Some will simply be wiped out because supplies, which are crucial for the operation will no longer be available. Over the years the food system has become more and more complex with considerable movement during the processing stages. In Ireland, the produce of farms may originate in the North and be processed in the Republic or vice versa. Despite all the rhetoric about maintaining the current free movement it is extremely difficult to see how this can be achieved if the UK is no longer in the SM. This poses a real problem for farming and food manufacturing businesses. It can take a long time to make changes, especially in farming. Switching from the production of milk to growing carrots cannot be done overnight even if it is a practical possibility. Hence it does not make sense to wait until the last minute to see how things play out. It is highly likely that those who are progressive will be making decisions in the very near future. Where possible, those heavily involved in exporting will move some of their operation to another EU Member State. This is already happening in other sectors such banking (3). EasiJet has decided to set up a company in Austria (4).

For many companies, the problems are compounded by the fact that there is no clear picture emerging from the UK Government. At the very least, investment plans will be put on hold. There are many small food companies and farmers who do not have the resources and/or interest to monitor the implications of the negotiations in order to make sound decisions. There is a real danger that these will be in serious trouble once Brexit is implemented and will not be able to survive. The result will be serious disruption and real hardship, including unemployment. If a deal is done with the USA to supply food, then most farmers in the UK will find it very difficult to survive (5).

Good news for farm shops

Perhaps the one positive note is that farm shops, which have a network of local suppliers are least likely to experience major problems. Assuming that there is very little dependence on products from overseas, in all probability they will survive and thrive. Perhaps this points the way forward and farmers should be making efforts to find outlets for their own produce rather than relying on the established markets.

By contrast, the major multiples, which depend on international sources for many products could be in serious trouble. At this stage, it is in their interests to examine the supply chains and identify potential vulnerabilities.

Conclusion

There is not the slightest doubt that the UK Government is making one hell of a mess of the Brexit negotiations. Cabinet ministers are still arguing amongst themselves and do not seem to have a clear idea of what they want to achieve, let alone devise a reasonable strategy in order to obtain a satisfactory outcome. All the signs are that it will be an unmitigated disaster and that many individuals will suffer because of increased prices and/or job losses. As we are told repeatedly:

“The clock is ticking.”

We can only hope that common sense kicks in and we end up with a Brexit that avoids the worst case scenarios many of us fear.

References

  1. http://www.eureferendum.com/default.aspx
  2. http://www.eureferendum.com/blogview.aspx?blogno=86542
  3. https://www.bloomberg.com/news/articles/2017-05-03/jpmorgan-to-move-hundreds-of-staff-to-three-eu-offices-on-brexit
  4. http://www.bbc.co.uk/news/business-40604375
  5. http://www.eureferendum.com/blogview.aspx?blogno=86551