Shares Magazine - August 22, 2019

BIG NEWS

 8 | SHARES | 22 August 2019

T

here were two bombshells in the weekend

press for the UK food industry. First, leaked

ŐŽǀĞƌŶŵĞŶƚĮůĞƐƉƌĞĚŝĐƚĞĚƚŚĂƚŝŶƚŚĞĞǀĞŶƚ

of a no-deal exit from the EU, supplies of fresh food

would be reduced.

Second, Lidl’s Irish subsidiary reminded its

ƐƵƉƉůŝĞƌƐƚŚĂƚĂƐŽĨϭEŽǀĞŵďĞƌƚŚĞLJǁŽƵůĚŶĞĞĚ

ƚŽĐŽǀĞƌĂůůŝŵƉŽƌƚĚƵƟĞƐĨƌŽŵƚŚĞh<͘

ĞƐƉŝƚĞƉƌŽƚĞƐƚĂƟŽŶƐĨƌŽŵŵŝŶŝƐƚĞƌƐƚŚĂƚ

ƚŚĞůĞĂŬĞĚƌĞƉŽƌƚ͕ĐŽĚĞͲŶĂŵĞĚKƉĞƌĂƟŽŶ

Yellowhammer, was ‘old’ and represented a

ǁŽƌƐƚͲĐĂƐĞƐĐĞŶĂƌŝŽ͕tĞƐƚŵŝŶƐƚĞƌŽĸĐŝĂůƐŝŶƐŝƐƚĞĚ

that it was compiled this month and painted a

picture of ‘likely, basic, reasonable scenarios – not

the worst case’.

DĞĂŶǁŚŝůĞ>ŝĚů͕ǁŚŝĐŚŚĂƐϭςϮƐƚŽƌĞƐĂŶĚ

ĂϭϮйŐƌŽĐĞƌLJŵĂƌŬĞƚƐŚĂƌĞŝŶƐŽƵƚŚĞƌŶ/ƌĞůĂŶĚ͕

ƐĞƌǀĞĚŶŽƟĐĞƚŚĂƚŝƚĞdžƉĞĐƚƐƐƵƉƉůŝĞƌƐƚŽĨŽŽƚƚŚĞ

ďŝůůĨŽƌhŝŵƉŽƌƚƚĂƌŝīƐƵŶĚĞƌŝƚƐ͚ĚĞůŝǀĞƌLJĚƵƚLJͲ

paid’ agreements, raising the prospect of higher

costs for UK food and drink exporters to the whole

of the EU.

͚EKdWZK:d&Z͛

Whitehall insiders described the leaked dossier,

which revealed details of the government’s behind-

ƚŚĞͲƐĐĞŶĞƐĞīŽƌƚƐƚŽĞŶƐƵƌĞƐƵƉƉůŝĞƐŽĨĨƵĞů͕ĨŽŽĚ

ĂŶĚŵĞĚŝĐŝŶĞ͕ĂƐ͚ƚŚĞŵŽƐƚƌĞĂůŝƐƟĐĂƐƐĞƐƐŵĞŶƚŽĨ

what the public face’ in the event of no deal.

According to the dossier, a no-deal exit would

not only impact the availability of fresh food

Food and drink

industry on alert

Leaked government paper on no deal Brexit and retail pressure add to woes

for the sector

but also key ingredients and even the chemicals

ƌĞƋƵŝƌĞĚƚŽƚƌĞĂƚĚƌŝŶŬŝŶŐǁĂƚĞƌ͘ƵĞƚŽĂůĂĐŬŽĨ

ǀĞƚƐĂŶĚĂďĂƩŽŝƌƐƚĂīƚŚĞƌĞĐŽƵůĚĂůƐŽďĞĂŵĂũŽƌ

ďŽƩůĞŶĞĐŬŝŶŵĞĂƚƉƌŽĐĞƐƐŝŶŐ͘

&ŽƌƚŚĞŝŶĚƵƐƚƌLJ͕ƚŚĞƟŵŝŶŐŽĨƚŚĞh<͛ƐůĞĂǀŝŶŐ

ƚŚĞhĐŽƵůĚŶŽƚďĞǁŽƌƐĞĂƐƚŚĞƌĞŝƐŶŽŇĞdžŝŶƚŚĞ

system ahead of Christmas, with frozen, chilled and

ambient warehouses already full.

Kh>t,DDz

&Žƌh<ĨŽŽĚƉƌŽĚƵĐĞƌƐĞdžƉŽƌƟŶŐƚŽƚŚĞh

there was already the prospect of major delays

ĂƚŚĂŶŶĞůƉŽƌƚƐůĂƐƟŶŐŝŶƚŽƚŚĞEĞǁzĞĂƌ͘dŚĞ

government report suggests that up to 85% of

ƌŝƟƐŚůŽƌƌŝĞƐŵĂLJŶŽƚďĞƌĞĂĚLJĨŽƌĞdžƚƌĂ&ƌĞŶĐŚ

customs checks by October, but there is also the

issue of border checks in Ireland.

Adding to their problems, the warning from

Lidl Ireland that UK suppliers will need to pay all

hŝŵƉŽƌƚƚĂƌŝīƐŵĞĂŶƐƚŚĞLJĐŽƵůĚďĞƐƵďũĞĐƚƚŽ

higher costs not just in Ireland but across the EU.

tŚŝůĞƚŚĞh<ŐŽǀĞƌŶŵĞŶƚĐĂŶƐĞƚƚĂƌŝīƐŽŶh

goods entering the country, it has no say on EU

ƚĂƌŝīƐŽŶh<ŐŽŽĚƐďĞŝŶŐĞdžƉŽƌƚĞĚ͕ĂŶĚ>ŝĚůŝƐ

unlikely to be alone in demanding that suppliers

ƐƚƵŵƉƵƉƚŚĞŝŶĐƌĞĂƐĞĚĚƵƟĞƐƵŶĚĞƌĂŶŽͲĚĞĂůĞdžŝƚ͘

One of the UK’s biggest food exports by value

ŝƐ^ĐŽƚĐŚǁŚŝƐŬLJ͕ǁŝƚŚάκ͘ϳďŶŽĨƐĂůĞƐůĂƐƚLJĞĂƌŽĨ

ǁŚŝĐŚϯϬйǁĞŶƚƚŽƵƌŽƉĞ͘&ŽƌĚƌŝŶŬƐŐŝĂŶƚŝĂŐĞŽ

;'Ϳ͕ϮκйŽĨŝƚƐƐĂůĞƐŽƌάϮ͘ρďŶǁĞƌĞƚŽƵƌŽƉĞ

last year including whisky.