According to ONS trade data for 2023, the UK has lost about £1.9 billion of annual food exports to the European Union since Brexit. This should shock no one. Food was always going to be the export trade hardest hit by Brexit, since food production is what the EU most closely protects and controls.
But is £1.9bn a big number? Not relative to the UK’s £364bn of total goods exports. And it pales beside recent carnage in our auto and aerospace industries, which has nothing to do with Brexit. Besides, food exports is one of our least-valuable export industries. It delivers just 5-6% of our total goods exports in any given year.
Nevertheless, £1.9bn is a big shock for a small industry. And it’s a sector with high UK value-add, meaning that the goods involved often have a high UK input. So, lower exports impacts jobs or profitability (since some produce now stays in the UK and sells at a lower price).
The new Labour government looks like it wants to do everything it can to encourage food exports to the EU. This may involve expediting export processes. For example, UK exporters currently complete export health certificates for products of animal origin bound for the EU. Ease barriers such as these and food exports will rise – or so the argument goes.
But does a trade rapprochement with the EU make sense? Given the numbers involved and given the concessions we’d have to offer – say, fishing quotas and national compliance with Single Market regulations in agrifood – might the UK be better off pursuing global markets instead?
Good trade policy involves knowing your competitive advantage, identifying fast-growing markets, then pursuing the opportunities. Are those opportunities really in the EU?
The UK’s competitive advantage in food and fisheries
My report for Civitas, Boosting Britain’s Food Exports, which is published this week, analyses the best prospects for British food exports. It identifies the foodstuffs in which we have a genuine competitive advantage. And it explores the markets for which there is a growing appetite for the food we produce.
One fact should be faced straight away: the UK is never going to compete on volume with other food producers. We don’t produce nearly enough meat, grains, fruit or vegetables to feed ourselves, and haven’t for two centuries. Unless we follow the Dutch model of industrial horticulture, we never will.
But where we do have an edge is in premium, high-welfare, artisanal produce; high-value seafood; also, in high-end food brands. These include: dairy (especially cheese); premium and organic beef and pork; fish and crustaceans. There is also a market for British branded goods (such as chocolate bars, health foods and cereal mixes) in countries with a link to the UK, such as those with large expat populations, or countries with a high number of students that have returned from British universities.
This report examines where there is growing demand for these goods around the world, including North America and East Asia. And it looks for comparisons. It examines the recent history of countries that have grown global exports in the sectors that are relevant to the UK, specifically Australia, New Zealand and Norway.
Lessons learned from New Zealand, Norway and Australia
As it turns out, these countries have recently grown agrifood exports on a scale the UK never achieved while our trade policy was determined by EU-wide interests. For example, New Zealand now sells US$4.2bn of dairy (milk, cheese, and baby formula) to China. Our dairy exports to China are worth just $65 million, or little more than 1% of New Zealand’s. Meanwhile, Australia is a major exporter of organic beef to the US.
Seafood deserves special analysis. Norwegians catch, farm and export many of the same fish species as the UK, and in adjacent waters. But while the UK’s seafood exports are worth just £1.8bn, Norway has built a £12.8bn export industry.
One lesson from Norway is that distance doesn’t matter. Despite being thousands of miles away, Japan and Korea are Norway’s most valuable overseas markets for mackerel, worth US$644m last year. Why does this matter? Because mackerel is the UK’s most valuable catch. There is a huge potential market for our seafood in East Asia that we are currently not exploiting.
Expanding Asian markets has a political benefit too. Nothing will stiffen the UK’s hand in quota negotiations with the EU in 2026 like the confidence we can diversify our seafood exports away from France. That country currently takes 50% of our crustacean and mollusc exports, which is why our negotiating position is so weak. Market diversification is the key to quota re-patriation.
Our future growth will be in global markets – whatever we do
Ultimately, trade policy is a matter of strategic calculation. Does it make sense for UK policy to focus on EU markets for food exports? Well, it would if our agrifood markets in the EU grew faster than our global markets; if EU agriculture and food was complementary to our own; if the EU was equitable in its approach to fishing quotas; and if EU customers showed a genuine appetite for UK food brands, then – sure – prioritising EU markets would be in our long-term interest.
But none of these things are true. Few of our major agrifood export sectors showed signs of sustained growth in EU markets prior to Brexit. That’s why the EU’s share of UK agrifood exports declined relentlessly, from almost 80% in 2007 to just over 60% in 2021. Brexit is just accelerating a trend. If we reach back to Europe, what will we get for the grief? It will simply slow down a pivot to more profitable markets.
Meanwhile, the damage from exiting the Customs Union and the Single Market is contained to £1.9bn per year. That’s a sum we can make up by promoting the competitive parts of our agrifoods industry in fast-growing markets where consumers pay premium prices. In the long run, that will yield far greater export dividends and reward the parts of our UK industry that are most determined.
We can pursue these opportunities by copying what other countries do to expand exports. We could, like New Zealand, focus trade negotiations on a strategic partner. We could, like Australia, create a taskforce to help exporters diversify to new markets. We could expand the Agrifood Attaché program, so we have specialists in specific sectors in strategic markets, who can interact with exporters one-on-one.
The UK has assets that are genuinely prized in global markets: safe dairy, reliable organic produce, quality brands, superb fisheries and high-grade aquaculture. If we actively pursue our best prospects, then in five years’ time the £1.9bn shortfall caused by leaving the EU will be an irrelevance. The UK food export industry will be dynamic, full of passion, and a source of prosperity to people who care about high-quality food, farming and fishing.
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