CURRENT ISSUES
Brexit

Food and drink wholesale is a critical part of the British economy. Food and drink wholesale distribution is a sector in its own right, turning over £29 billion, employing nearly 60,000 people and generating gross value added of £3 billion annually. Wholesalers’ depots are located in all regions and devolved nations to distribute goods to independent retailers and caterers in local communities.

There are a number of issues which pose challenges to the future success of the sector including the impending exit from the European Union, food inflation and the automation of manual roles. FWD are already working, along with our businesses in the sector to ensure that we and the sector are well placed to manage the challenges posed by Brexit.

One of the really key challenges for our labour intensive industry will be ensuring a good and skilled workforce. Many wholesalers employ high number of European Migrant workers. It will be critical to us to ensure this supply of labour.

Over 90 per cent of the value of direct purchases by food and drink wholesale distributors are from suppliers in the United Kingdom. However, the food and drink manufacturers that they purchase from import a much larger share of their goods and 70 per cent of their imports come from the European Union. As such, the sector would be best served by a comprehensive trade deal after Brexit which keeps tariffs or trade barriers to a minimum.

If there is no deal agreed between the United Kingdom and the European Union and trade is conducted under World Trade Organisation rules it will be essential to ensure tariffs imposed under these rules aren’t overly burdensome. The sectors which they will affect most are related to food, drinks and tobacco. If a free trade agreement is not reached then the food and drink wholesale distribution sector will face further upward pressure on their suppliers’ prices.

To the brink
Six weeks to go: No Deal advice and Guidance

February 18: The Government is concerned about how prepared businesses are for No Deal, particularly the food and drink industry, although they appreciate that planning for No Deal is not a straightforward process. A series of Technical Notices has been produced with information about what to do to plan for No Deal across multiple business areas.

Information can be tailored so relevant business documents are highlighted. The process allows you to identify yourself as a food and drink wholesaler and whether you directly import or export, employ EU workers etc. Most of the documents have now been published, although there are some crucial gaps, for example on tariffs – which are due “imminently”.

Defra is also keen to highlight the HMRC partnership pack, which provides information on how to prepare for No Deal.

February 4: HMRC has published advice for UK businesses that trade only with the EU, with details of important actions they need to take and changes to be aware of in the event of the UK leaving the EU without a deal.

The letter asks businesses to take a number of actions to prepare for no deal. These include:

  • registering for a EORI number at Get a UK EORI number to trade within the EU
  • deciding if they want to hire an agent to make import and/or export declarations for them or if they want to make declarations themselves using relevant software
  • registering for Transitional Simplified Procedures (TSP), which is a new process to make importing easier than it otherwise would be for the initial period after the UK leaves the EU, should there be no deal – registration opens from 7 February on GOV.UK.

There are also important updates on the way businesses trading with the EU pay import VAT and use EU VAT IT systems if we leave with no deal. You can read the full letter at Letters on ‘no deal’ Brexit advice for businesses only trading with the EU.

These changes do not apply to trade across the Northern Ireland-Ireland land border.

New guidance

HMRC has also published new guides on GOV‌.UK on:

The guides provide further information explaining what these changes mean for UK businesses that trade with the EU. You can find the guides at Trading with the EU if the UK leaves without a deal.

New ‘Prepare your business for the UK leaving the EU’ tool

We have also published a ‘Prepare your business for the UK leaving the EU’ tool to help UK businesses find out:

  • what they need to do to prepare for the UK leaving the EU
  • what’s changing in their industry
  • information on specific rules and regulations.

All businesses need to do is answer 7 simple questions to get guidance relevant to them and their sector. You can access the tool at Prepare your business for the UK leaving the EU.

 

 

January 30:

‘Prepare for No Deal, Minister tells FWD

FWD met Food Minister David Rutley prior to January 29th’s amendment votes. The Minister stressed that No Deal remained a very real prospect. He urged all wholesalers to continue with their Brexit No Deal preparations.

Mr Rutley said Government were working with business to help No Deal planning but if any wholesalers were unclear about what they should be doing to let FWD know, as the Federation had a direct route to officials leading on No Deal planning. Mr Rutley also said that potential post Brexit tariffs would be published “soon” and that the plan was for “low to no” tariffs on food wherever possible.

In December FWD hosted a roundtable for wholesalers and senior officials from DexEU and Defra to discuss Brexit, and a further meeting is planned for this February.

Withdrawal Agreement

This is the agreement between the UK and the European Union on how the UK will leave in March 2019 and what will happen during the transition period. It is during the 21 month transition period from March 2019 that the UK and the EU will negotiate a formal free trade agreement. This is not included within the Withdrawal Agreement.

Most of the key details had been known in advance, with the Agreement now giving legal effect to many of these details. The key issues are as follows:

  • The implementation period will take effect after 29th March 2019. It will last 21 months during whichthe UK would continue to follow all European Union rules and will remain under the jurisdiction of theEuropean Court of Justice;
  • Both sides will use their “best endeavours” to ensure that a long term trade deal is in place by the endof 2020. Although, if more time is needed, the option of extending the transition is available althoughthis will require additional financial contributions from the UK;
  • In the event of no long term trade agreement and no extension of the transition, the “backstop” wouldtake effect in order to ensure that no hard border emerges between Northern Ireland and the Republicof Ireland;
  • If a backstop is needed, it will take the form of a temporary customs union (or a ‘single customs terri-tory’) encompassing not just Northern Ireland but the whole of the UK;
  • If either party notifies the other that it wants the backstop to come to an end, a joint ministerial com-mittee will meet within six months to consider the detail. But the backstop would only cease to apply if EU and UK decide jointly that it is no longer necessary. In other words, the UK will not have a unilateral right to bring those arrangements to an end;
  • The UK will honour all financial obligations undertaken while the UK was a member for the fundingperiod that runs to 2020;
  • A commitment to protect citizens rights of those currently residing in the UK or EU;
  • A commitment not to introduce any ‘exit visa, entry visa or equivalent formality’;
  • A commitment to the UK maintaining environmental standards after it leaves the EU.
    The UK Parliament is expected to vote on the Withdrawal Agreement in December, but with current indi- cations being that the Government will fail to secure a majority on this deal, businesses should continue to plan for a No Deal scenario.

 

October 13: The Government has also appointed David Rutley as Minister for Food Supplies in Defra to oversee the protection of food issues through the Brexit process.

Read our assessment of potential tariff scenarios for deal and no deal outcomes

There will be significant changes to food labelling as an EU address alone would no longer be valid for pre-packed products sold in the UK market. Similarly, a UK address alone would no longer be valid for the EU market and an address within the remaining EU member states will be required following EU exit.

From April 2020, the country of origin or place of provenance of the primary ingredient of a food will be required on labels as part of EU rules on food labelling. The Government may apply similar national rules in the UK when EU rules no longer apply.

  In the event of no deal, UK hauliers can no longer rely on automatic recognition by the EU of UK-issued Community Licences. The Government has introduced a new Haulage Act to enable the delivery of new systems for road haulage under no deal. The Government has also ratified the 1968 Vienna Road Traffic Convention, for UK licence holders to continue to drive in the EU if there is no deal.

The UK will be a third country for EU member states. This means that to travel to the EU, a person will need to go through a third country procedure for Schengen processes. These procedures limit a person’s stay to 90 days and require that a person has a passport that is valid for not shorter than three months after the final point in which they could stay in the EU.

 

Migration Advisory Committee European migrant report

The Migration Advisory Committee has published its final report looking into European Economic Area migration in the UK, giving the MAC’s conclusions and recommendations for the UK’s post-Brexit work immigration system. The MAC is an independent body of experts whose job is to advise the Home Office on migration. The purpose of the report was to outline the sectors who rely on EU labour, and to look at the current free movement of labour.

The report suggests the same visa requirements for workers from the EEA as other migrants to the UK, and scrapping limits on higher-skilled migrants to the UK, as well as the system being extended to mid-skill roles, so a degree would no longer be required. With regard to low-skilled workers, the MAC says it is “not convinced there needs to be a work route for low-skilled workers” from the EU to fill jobs in industries such as catering or hospitality.

 

Brexit timetable

December 13-14 is  the last date for an Article 50 divorce deal to be signed off by Britain and the EU.

By January/February 2019 the House of Commons have to approve whatever Brexit deal that has been agreed and MPs must also pass a Withdrawal Bill that puts the exit treaty into law.

Until March 29 2019 the Withdrawal Agreement will need to be supported at an EU summit by a large majority of Member State leaders and the decision must also be approved by the European Parliament in a vote.

March 29 2019 is Brexit day. On March 30 2019 trade talks will begin between the UK and the EU and the transition period will start.

The transition period is scheduled to end on December 31, 2020.