Sell food to the EU? Here’s what happens post-Brexit

Posted on 24/06/2016 · Posted in Blog

For those with strong trading links to the EU, the first response to the Brexit result will be one of concern.

A formal departure will take years to agree but the immediate effect could be positive. Some experts have warned that sterling could fall by as much as 20%, making British goods more attractive abroad (although import costs will of course increase).

The big question will be around the post-referendum trading agreement between Britain and the EU, which will dictate how easy it will be to sell abroad (and will not be answered straight away). The only legal path to Brexit is by invoking Article 50 of the Lisbon treaty. The Economist has said that Article 50 “provides that the terms on which Britain leaves must be agreed by a majority of the EU’s other 27 members, without a British vote. It sets a two-year deadline that can be extended only by unanimity.”

A trade deal will most likely be negotiated separately from the general Brexit agreement and the trade deal requires “unanimous agreement of all 27 countries, as well as ratification by national parliaments.” Although nothing is certain, the terms of any such agreement may be made unfavourable as a deterrent to further fragmentation of the EU. One result could be the return of mutual tariffs (including on food and fish), which could weaken export markets but strengthen domestic ones.

There are several potential outcomes from the trade negotiations. First, Britain could sit (with Norway) in the European Economic Area. Access to the Single Market would be retained (although Britain would potentially still contribute to the EU budget, follow regulations and observe free movement of people).

Secondly, it could instead negotiate a separate free trade agreement, which would take years to agree and may not remove tariffs. Alternatively, it could revert to trading with the Union under WTO rules (America and China do this).

One additional result of Brexit could be Scotland and Northern Ireland leaving the UK to remain in the EU. For those trading within the United Kingdom, this could see domestic markets becoming foreign ones, with all the resulting implications on trade.

Within the next few months, the direction of travel should become clearer. A sensible initial response would be for businesses to strengthen their domestic markets and foreign ones, where no change is anticipated, to protect against future disruption to income channels. Immediately, brands should seek to capitalise on the weakness of sterling whilst the current tariff-free trade exists.