Summary
The UK poultry sector is dependent on exports of ‘dark meat’ to maximise its revenues. Currently 70% of these exports go to EU27 markets. This trade will become increasingly difficult under a ‘no-deal’ Brexit scenario if the EU applies both standard MFN tariffs and its rigorous 3rd country import controls on UK poultry meat. The application of such rigorous controls is made more likely by the probable shortage of veterinarians in the UK post Brexit to carry out the inspections and certification required for imports into the EU to take place. Attaining compliance with standard EU poultry meat import requirements or finding internal markets UK markets for poultry ‘dark meat’ if likely to take some time. This could leave UK exporters seeking alternative overseas markets for their ‘dark meat’ exports from 30th March 2019, in a context where ACP markets already take 42.2% of overall UK extra-EU poultry meat exports. Both African and Caribbean governments who wish to support local poultry sector development will need to consider carefully how they are to manage this likely development.
The UK is currently the fourth-largest poultry meat producer in the EU having recently fallen from 3rd place. The poultry industry directly employs over 37,000 people and sustains a total of 87,700 jobs, with a turn-over of £7.2bn and a contribution of £5bn Gross Value Added (GVA) to the UK economy. However with poultry accounting for 50% of UK meat consumption, the UK is only ‘about 60% self-sufficient’ and is a net importer. With UK consumers having a distinct preference for breast meat, the issue of the ‘carcass balance’ and securing markets for all poultry cuts is an important issue (1).
The common pattern across the European poultry industry is that a company ‘disassembles its product in one place and then has to find a market for every part of the animal in order to maximise returns’. Thus we find although the UK is a net importer of poultry meat ‘exports are essential for the industry because consumers in the UK prefer to eat white breast meat, rather than dark chicken meat (wings, legs, thighs) which has a small domestic market’. However these poultry parts represent 75% of the bird and as such in order to maximise revenues the UK poultry sector needs to find outlets for this ‘dark meat’. Currently this largely goes to EU27 markets (70%). This amounts to between 250,000 and 300,000 tonnes a year of UK ‘dark meat’ exports to EU27 markets (1).
To put this in trade context, in 2017 the UK exported only 77,056 tonnes of poultry meat beyond the EU’s borders, of which 32,533 tonnes went to ACP markets (some 42.2%). The main markets for these UK export were Central Africa (12,497 tonnes), West Africa (11,389 tonnes) and the Caribbean (5,926 tonnes) with the remainder going to Southern, Eastern and Indian Ocean ACP countries (3,721 tonnes).
UK Extra-EU Poultry Meat Exports tonnes
| 2015 | 2016 | 2017 | |
| UK Extra EU Exports | 68,995 | 97,930 | 77,056 |
The challenges facing the UK poultry sector under a ‘no-deal’ Brexit scenario needs to be seen in a context where in August 2018 the policy director of the International Meat Trade Association, Katie Doherty warned the meat industry is likely to be the sector most severely affected by Brexit. This is for three reasons:
- the application by the EU of standard 3rd country MFN tariffs, of 50% and above;
- the EU veterinary checks: which will require export health certificates and entry through approved border inspection posts, where vets can inspect up to 50% of poultry meat consignments; with these inspection requirements seriously impacting on the shelf life of fresh and chilled meat products; and
- customs checks: in a context where many intra-EU traders have no experience in handling customs declarations. This could potentially cause considerable delays at ports (2).
This led the British Poultry Council to warn of the ‘severe consequences for the industry’ arising from a ‘no-deal’ Brexit (2). These concerns are reinforced by warnings from the National Audit Office in September 2018 of a likely shortage of veterinary inspectors in the livestock sector given increased demand for certification services. It warned that ‘without a significant increase in the UK’s veterinary capacity, Defra will be unable to process the increased volume of export health certificates it expects if there is no deal’. It was held that in order to achieve the required capacity ‘Defra needed to provide the market with sufficient notice and certainty about the scale of the increased capacity required’. However by September 2018, initiatives targeting recruitment of vets scheduled to begin in April 2018 had not yet got underway (3).
This area of delay is serious and carries very real commercial consequences for ‘if there are not enough vets, consignments of food could be delayed at the border or prevented from leaving the UK’. Even with an emergency recruitment campaign it was held the government would still fall far short of minimum requirements. To fill the gap in trained vets DEFRA is proposing to use ‘non-veterinarians to check records and processes that do not require veterinary judgment’ (3). However It is unclear whether this would be accepted by the EU authorities, since this may be in technical violation of EU regulations.
On the import side the UK imports around 456,000 tonnes of poultry meat from the EU, ‘95% of all these poultry imports, both fresh and frozen, are of whole chicken breast or made-of-chicken-breast products’. In contrast UK imports of processed poultry meat largely come from non-EU countries (Thailand and Brazil), but with most of these products also being based on breast meat. These imports total around 366,000 tonnes per annum. These processed meat imports are ‘increasingly found in convenience products, ready meals and at fast food outlets’ (1).
It is against this background that the Respublica report seeks to review the potential impact of different Brexit scenarios. The report reviews 3 Brexit scenarios:
- ‘Evolution’: which is essentially a status quota option in which no changes to the basic EU27/UK trade regime occur;
- ‘Trade Liberalisation’: a reversion to WTO terms with a unilateral removal of tariffs on trade;
- ‘Fortress UK’: where the UK fails to reach a trade deal with the EU and reverts to WTO terms including on imports from the EU
The report argues the ‘Fortress UK’ option represents the worst option for the poultry sector, since ‘restrictions on the free movement of labour will result in increasing wage and labour costs of 50%’, with wages in the sector already having gone up 25% since the referendum as labour market conditions have tightened (1). The poultry sectors fear of labour shortage need to be seen in the context of remarks from the chair of the Migration Advisory Committee who said the British agro-food sector would ‘no longer have privileged access to cheap low-skilled workers form the EU after Brexit’. In future the government intends to priorities highly skilled labour, in sector where workers earn in excess of £30,000 a year (4).
A ‘no-deal scenario it is held presents ‘unprecedented challenge to the quality, availability, affordability and choice of poultry meat in the UK’.
The report highlights how should the UK fail to reach a deal with the EU and subsequently decide to remove all tariffs on poultry meat imports then ‘there is a danger that UK consumers will be faced with a lowering of standards and poorer quality food with imports from non-EU state’.
It is further argued leaving the EU without a deal could result in the ‘rolling back the EU’s regulatory net’, whereby the UK would be ‘forfeiting access to EU regulatory bodies’, thereby losing ‘monitoring, scrutiny, transparency, accountability and enforcement powers for its environmental policies that make it Europe’s leader in this field’. This combined with NAO warnings of serious risks of system failures within the UK border control regime makes the prospects of strict EU controls on imports of ‘dark’ poultry meat originating in the UK highly likely (for details of NAO warnings see companion epamonitoring.net article ‘UK National Audit Office Warns of Lack of Border Preparedness for Brexit’, 22 November 2018)
Looking to the future the ResPublica report proposes the following safeguards should be set in place within any future UK poultry sector policy framework:
- ‘Maintaining health and welfare standards & prioritising the need for strong regulators’;
- ‘Increasing productivity, innovation and investment through fiscal enticements’ to stimulate investment in green technologies and innovation to make use of the whole carcass;
- ‘Securing access to high-quality labour by introducing a flexible visa system’;
- ‘Prioritising British food through social value in public procurement’;
- ‘Educating consumers to be sustainable and use the whole bird’, so as to address the problems of surplus ‘dark meat’.
It strongly advices against any moves towards suspending food controls on perishable food products at the border and insists that in any future trade negotiations the UK needs to maintain high production and food safety and environmental standards.
| Comment and Analysis The recognition of the problems for the UK poultry industry created by the absence of EU27 markets for ‘dark meat’ highlights the importance of sub-Saharan African markets to the UK poultry industry under a ‘no-deal’ Brexit scenario.If a ‘no-deal’ Brexit were to occur then given the absence of a formal EU/UK agreements on trade in animal products, the UK’s trade in ‘dark’ meat to EU27 markets would be likely to face major logistical challenges linked to the imposition of standard EU 3rd country import controls on UK meat products. This problem is likely to be further compounded by a shortage of vets in the meat industry to carry out factory inspections, since currently many of these meat industry vets are non-UK nationals. The loss of the EU27 market for UK ‘dark meat’ exports would almost quadruple the need for non-EU markets for exports of UK poultry parts. ACP markets already take over 40% of total UK extra-EU poultry meat exports. This could lead to an increased focus on UK ‘dark meat’ exports to ACP market (particularly in sub-Saharan Africa). This is a potential trade development which those ACP governments which would like to see their domestic poultry sectors develop will need to prepare themselves for. In this context it should be noted that a disproportionate level of UK poultry meat exports are destined for Caribbean markets, in a context where the poultry sector is the single largest agricultural sector in the Caribbean. In this context care will need to be taken in regard to the basis on which the current EU-CARIFORUM EPA is rolled over into a ‘UK-only’ trade arrangement. The Caribbean poultry sector has no interest in seeing increased competition from UK exporters of low priced ‘dark meat’ if a desperate UK search for alternative markets to EU27 markets got underway following a ‘no-deal’ Brexit. Given the state of current discussions it would appear highly unlikely that the ResPublica reports ‘wish list’ for the UK poultry industry will be realised in the short to medium term. For example, in regard to the maintenance of high standards and a strong regulator this is not just a policy question but also a major operational challenge given the multiplicity of demands for an expansion of government trade related services which Brexit will give rise to. Equally the objective of securing labour needs through a flexible visa system, sits very uneasily with orientation for future UK migration policy set out by the chair of the Migration Advisory Committee. What is more persuading British consumers to reverse their current preference for breast meat and move back to consuming all portions of locally raised chickens would appear highly unlikely. In this context a rapid expansion of UK exports of ‘dark’ poultry meat to ACP markets in the coming years appears increasingly likely. |
Sources:
1) ResPublica, ‘Coming Home to Roost: The British Poultry Meat Industry After Brexit’, 5 September 2018
ttps://www.respublica.org.uk/wp-content/uploads/2018/09/ResPublica-Report-Coming-Home-to-Roost-Sep-2018.pdf
(2) Globalmeatnews.com, ‘What a no-deal Brexit might mean for the meat industry’, 14 August 2018
https://www.globalmeatnews.com/Article/2018/08/14/Repercussions-of-Brexit-on-the-meat-industry
(3) foodmanufacturer.co.uk, ‘Vet shortage causing border concerns’, 12 September 2018
https://www.foodmanufacture.co.uk/Article/2018/09/12/Vet-shortages-could-cause-border-delays
(4) neweurope.eu, ‘No more EU fruit pickers for the UK’, 18 October 2018:
http://www.freshplaza.com/article/9033712/no-more-eu-fruit-pickers-for-the-uk/