What does the EU-UK ‘reset’ mean for food & drink supply?

For years, your weekly shop has gone up,” PM Keir Starmer said this week. “Our deal with the EU will mean lower food prices at the checkout, putting more money in your pocket.”

The words followed his announcement of a “historic” deal with the European Union to slash red tape and make it easier for businesses to trade food and drink with Britain’s closest partner – in the same week official figures showed food inflation rose to 3.4% in April as labour tax hikes filtered through to consumers.

Monday’s agreement to align the UK’s sanitary and phytosanitary (SPS) rules with the bloc would remove the need for costly checks on food goods, thus reducing border bureaucracy that led to lengthy lorry queues – and ultimately lowering grocery prices, Starmer said.

His claims were backed by some of the UK’s biggest supermarkets, who pledged to lower food prices as the supply chain costs eased.

Morrisons CEO Rami Baitiéh said: “Sweeping away trade barriers with the EU promises to ease a source of pressure on food prices and is therefore good news for shoppers.” His words were echoed by the likes of M&S and Asda.

But will their promises hold up? And what else does the deal mean for the food and drink industry?

As with all things Brexit, the full picture is more complex. Ged Futter, CEO of The Retail Mind, says the deal is “good news for the supply chain” as “goods will flow through the ports quicker”.

But Futter doesn’t believe that will manifest in lower prices. He finds it unlikely suppliers will agree to any cost price decreases in the current economic landscape.

It certainly “won’t stop retailers from asking” but Futter argues suppliers will only be as accommodating as retailers were when Brexit happened. “I’m sure that retailers pushed back pretty hard on all their suppliers, refusing to acknowledge these costs when suppliers were feeling them” after the EU exit vote.

Similarly Clive Black, the head of research at Shore Capital, is doubtful “food prices will be coming down any time soon”.

“Firstly because of the time it will take for all this to work through, and secondly, at best, given the costs that the UK State has imposed upon the UK food system, it may ease the eventual inflationary outcome.”

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Exports boost

For British food exporters, the benefits are clearer and more widely agreed upon. Having faced costly red tape since the start of 2021, when the EU rolled out strict controls on UK goods, they welcome the changes warmly.

The government estimates the new UK-EU deal will add £9bn to the economy by 2040. This is roughly equivalent to 0.3% of GDP – a boost but minimal in comparison to the 4% of GDP the government’s independent forecasters estimate has been lost as a result of Brexit.

Food & drink exports to the bloc took a particularly heavy hit, slumping by more than a third since Brexit [FDF]. Many businesses were forced to cease entirely.

The head of healthy foods brand Hunter & Gather, Jeff Webster, describes “being able to breathe again” after “losing 15% of the business overnight when Brexit came into force” at the end of 2020. Hunter & Gather had to close down website sales “because every order needed a health certificate from a vet costing in excess of £200 every time”.

Hunter & Gather also had to “completely cease exporting its organic products due to the difficulty and cost of getting organic registration”, he adds. “Plus, any organic products we sourced from the EU, we were not allowed to export back to the EU”, thanks to the complexity of the post-Brexit controls.

So the new deal will “enable us to significantly improve margin”, Webster says.

Julianne Ponan, CEO of allergen-free baked goods brand Creative Nature, is similarly encouraged. She says the new deal “has the potential to be game-changing for exporters”.

“No more flying over on a passenger flight just to get samples into Spain for us”, she wrote on social media, before adding: “We’re genuinely excited about the doors it could open and is going to be fantastic for international growth.”

The Brexit burden was mainly carried by those trading agrifood goods considered riskier from a biosecurity standpoint, like meat and dairy. According to the NFU, volumes of beef exports to the EU fell by 24% between 2019-2024, while poultry shrunk by 37.7%, lamb by 14%, and dairy by 15.6%.

NFU president Tom Bradshaw says farmers are pleased “the government clearly listened” to their concerns, and that scrapping red tape on agrifoods trade will “deliver many benefits for agrifood exports to the EU”. An Aston University study last year estimated a UK-EU vet agreement would boost agri-food exports by more than 20%.

David Lockwood, the chairman of Neal’s Yard Dairy, which has been exporting British cheeses to the EU for over 30 years, says: “This agreement has the potential to lead to a reduction in the administrative cost, travel time and general turbulence, offering greater scope for us to sell even more cheese in the EU.”

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But the news has perhaps brought the greatest relief to those in Northern Ireland. British businesses shipping to NI have been facing more burdensome controls at the so-called ‘Irish sea border’ since Brexit, in efforts to prevent the need for a land border between NI and the Republic of Ireland, which is in the EU single market for goods.

This has meant some have been reluctant to export to NI. M&S Food MD Alex Freudmann says the SPS agreement removes “the pointless bureaucracy we face in moving our products across Great Britain, Northern Ireland and the Republic of Ireland, and ensures we can supply the widest range of products at the best possible price”.

Northern Ireland’s first minister Michelle O’Neill cautions “the devil will be in the detail”, with many regulatory divergences – not least deforestation laws – and their impact on businesses across the island of Ireland still to be discussed between London and Brussels.

“This deal does not solve every challenge overnight”, says Tina McKenzie, policy chair of the Federation of Small Businesses, “but it sets a very welcome new tone”.

A ‘betrayal’ of fishing

However, not every section of the industry is pleased. As part of the negotiations, ministers also gave the EU continued access to UK waters for another 12 years, essentially locking in the controversial Boris Johnson quotas deal until 2038.

This has caused uproar in the fishing industry, with the Scottish Fishermen’s Federation deeming it “a horror show” and a “betrayal” of the sector, which was hoping for a better outcome when talks about quotas were due to take place next year.

The day after the Brexit reset summit, Defra secretary Steve Reed was grilled by the Efra committee on whether fishing had been “traded against other areas”.

The minister staunchly defended what he said was a “reasonably good deal”, claiming it brought “certainty” to the sector compared to the annual discussions’ terms. He argued the UK fishing sector exports 70% of its catch into Europe, and therefore would also benefit from the SPS agreement.

“[Fishers] will appreciate this was a negotiation”, Reed said. “At the end of the day, I still think this is a good deal. If you look at the wider impact on the economy, it’s a huge boost.”

Devil in the detail

As many point out, the proof will be in the pudding. “The agreement so far is to have an agreement”, notes EORI UK’s chief Rob Hardy.

There are also questions about the power of the UK devolved nations to have a say, as food standards and safety rules diverge in each country.

And changes are unlikely to be soon. While it’s been floated the SPS agreement could be in place by December – an outcome traders and BCP operators would certainly appreciate – trade experts are dubious of that timeline.

“These things take time, and I think there is still a lot of naivety in the system”, says David Henig, director of the UK Trade Policy Project. He notes it’s all about “how long it will take the EU to trust the UK checks are sufficient on [food] products that they remove all checks” entirely.

“In the case of Switzerland, it took nearly 10 years before negotiations started and the checks were removed. I’d be amazed if we have an SPS deal in six months.”