Summary
The Netherlands plays a dominant role as a distribution hub for ACP cut flowers to markets across the EU28. Any disruption UK cut flower imports from the Netherlands would carry important implications for most ACP cut flowers exporters, unless remedial administrative measures can be put in place. The likelihood of delays stripping value out of cut flower supply chains will require the role of the UK Groceries Code Adjudicator to be extended, with a special focus on ensuring unfair trading practices don’t increase in response to Brexit related trade disruptions. ACP cut flower exporters will need to urgently explore the scope for increased direct freight flights to the UK to circumvent delays along triangular supply chains. Those ACP cut flower exporters who can successfully ‘Brexit proof’ their supply chains will be well placed to capitalise on the shortages and rising prices a ‘no-deal’ Brexit could give rise to.
Recent press reports have highlighted the difficulties which will arise in the most time sensitive of all just-in-time supply chains, the trade in fresh cut flowers. The report highlights how ‘about 80% of the flowers sold in the UK are imported from the Netherlands which, in turn imports and auctions off flowers from across the world’. The Netherlands is an important trading centre for ACP fresh cut flower exports taking almost 90% by volume of total exports to the EU from the top 6 ACP cut flower exporters.
Cut Flower Exports to the EU and the Netherlands (tonnes) 2017
| Kenya | Ethiopia | Uganda | Zambia | Zimbabwe | Tanzania | Sub-Total | |
| EU | 133,232 | 76,524 | 12,566 | 6,586 | 5,443 | 3,451 | 237,802 |
| Netherlands | 111,720 | 73,889 | 12,477 | 5,242 | 5,399 | 2,932 | 211,659 |
| % Netherlands | 84% | 97% | 99% | 80% | 99% | 85% | 89% |
Source: EC, Market Access Data Base http://madb.europa.eu/madb/statistical_form.htm
Since 2007 the importance of the Netherland as the initial point of entry for ACP cut flower exports to the EU has increased for each of the main ACP cut flower exporters, except South Africa, where direct exports to the UK have grown to dominate, with the South Africa trade into the Netherlands virtually disappearing from 2016 and 2017 (2).
EU, UK, Holland: Trends in Main ACP Cut Flower Exports by Initial Landing (€’000) 2007 and 2017
| Kenya | Ethiopia | Uganda | South Africa | |||||||||||||
| 2007 | 2017 | +% | 2007 | 2017 | +% | 2007 | 2017 | +% | 2007 | 2017 | +% | |||||
| EU | 322,867 | 402,178 | +25% | 39,115 | 152,011 | +289% | 21,138 | 27,201 | +29% | 13,717 | 15,465 | +13% | ||||
| Neth | 205,305 | 291,739 | +52% | 33,245 | 141,372 | +325% | 20,613 | 26,607 | +29% | 6,121 | 106 | -98% | ||||
| UK | 76,180 | 61,836 | -19% | 1,632 | 8,954 | +349% | 510 | 593 | +16% | 634 | 12,721 | +1,906% | ||||
| UK % | 23.6% | 15.4% | 4.4% | 5.9% | 2.4% | 2.2% | 4.6% | 82.3% | ||||||||
| Neth % | 63.6% | 72.5% | 85.5% | 93.0% | 97.5% | 97.8% | 44.6% | 0.7% | ||||||||
Source: EC, Market Access Data Base http://madb.europa.eu/madb/statistical_form.htm
The British Flower Association believes a ‘no-deal’ Brexit worst case scenario could see the UK’s 7,000 florists selling 50% fewer flowers. The main concern is ‘border control and flowers getting stuck in transit’, since the nature of the sector means stockpiling is simply not possible.
Currently independent florists buy cut flowers online from auctions in the Netherlands from where they are shipped overnight allowing the delivery of a much higher retail value product. In this context there are fears that ‘border delays will make it harder both for flowers to be brought into the UK and for flowers to be delivered on time’, stripping value out of the cut flower supply chains.
An additional concern is the possible decline in the value of the £ against international currencies in which cut flowers are traded. This would then compound the cost-increasing effect of the application of tariffs to imports.
UK florists are placing their faith in the ability of Dutch flower traders to keep the supply chains functioning given the major financial interests involved (since annual UK imports of cut flowers from the Netherlands range between £800 to £900 million). It is felt this may even involve Dutch traders using UK ports beyond the traditional cross channel crossing routes in order to avoid transport bottlenecks in the South East of England.
In the cut flower sector small businesses are concerned about the differential impact of a ‘no-deal’ Brexit on different actors in the cut flower retail sector. Supermarkets are seen as being in a much stronger position than independent florists in dealing with the consequences of a ‘no-deal’ Brexit. It is felt Brexit could strengthen the position of supermarkets as cut flower retailers.
Online florist Bloom & Wild is already facing the consequences of Brexit uncertainties, since as a small scale operator it simply ‘can’t really run two parallel scenarios’ for its business planning.
| Comment and Analysis
There are a number of specific issues of concern for ACP cut flower exporters arising from possible disruptions to the cut flower trade under a ‘no-deal’ outcome to the current Brexit negotiations. The first of these is linked to the question of who will carry the cost of the value stripped out of the cut flower supply chains by delays in the delivery of flowers to the final consumer. The fear is the costs of these delays could be passed back down the supply chain to ACP exporters and growers. This will require ACP growers and exporters to pay close attention to the contracts negotiated for the supply of cut flowers to UK end users. Ideally prices should be fixed at the first point of landing in the EU/UK, so that ACP growers and exporters do not have to bear the costs of any subsequent Brexit related delays. However given the way existing supply chains function there are no guarantees that this will be possible. This suggests a need for an urgent strengthening of UK government regulations on the functioning of import supply chains for agri-food products. For some time the UK government has been concurring with EU policy initiatives aimed at removing unfair trading practices from within agri-food sector supply chains. In a specific UK context this will require a review of the operation of the Grocery Code to extend it to relations between UK importers and third country suppliers in developing countries. It would also require an expansion of the funding and capacity of the office of the Groceries Code Adjudicator to set up a special Brexit related task force to monitor how the additional trade costs arising from a ‘no-deal’ Brexit are distributed along import supply chains from producer to consumers. There is also the associated issue of who will bear the burden of the additional structural costs arising from the introduction of new controls on EU27/UK trade flows, once the UK is no longer part of EU SPS control networks. Unless some form of continued UK recognition of EU SPS controls at the first point of entry is agreed, ACP exporters using triangular supply chains will be subject to two sets of SPS controls. There would appear to be no reason why this should be the case for products where the underlying control regime applied by the UK remains aligned with that of the EU. If no such administrative agreements can be set in place the UK authorities will need to give careful consideration to providing financial support to smaller scale exporters where the burden of new SPS controls can be disproportionately felt. This will be particularly important for the smaller scale LDC based exports which have been developing cut flower exports in recent years. This raises a third issue, namely that not all ACP cut flower exporters will be in the same position. Some exporters, most notably Kenya have already sought to side step the possible disruptions along triangular supply chains by setting up new direct freight links to lesser used UK airports which are approved for SPS inspections (see companion epamonitoring.net articles ‘Hard Brexit Could Create Fruit and Vegetable Shortages in the UK’, 23 November 2017, and ‘Brexit and the Disruption of Triangular Supply Chains’, 8 March 2018). The switch over to direct shipment to the UK in the face of Brexit related uncertainties may well have been a factor in why South African cut flower exports to the UK virtually disappeared in 2017, although this still needs to be determined. Other ACP cut flower exporters may need to explore similar such direct freight arrangements for their exports to the UK market. However for smaller scale exporters this may require cooperation with exporters of other time sensitive products, so as to launch joint initiatives towards air freight companies to discuss the scope for the initiation of more direct air freight flights to lesser used, SPS approved, airports in the UK. In this context it needs to be borne in mind that a ‘no deal’ Brexit is likely to shake up the cut flower sector, with those ACP exporters which have ‘Brexit-proofed’ their supply chains being best placed to capitalise on the shortages and rising prices which any Brexit related disruptions of traditional supply chain could give rise to. |
Sources:
(1) The Observer, ‘Fresh blooms could become preserve of the rich in no-deal Brexit’, 16 February 2019
https://www.theguardian.com/uk-news/2019/feb/16/brexit-florists-cambridge-prices-border-delays
(2) EC, Market Access Data Base
http://madb.europa.eu/madb/statistical_form.htm