Food companies take note: the British farming industry is on the precipice of great change, arguably the greatest change since accession to the EU and membership of the Common Agricultural Policy (CAP) 45 years ago. And this change could have a big impact on the future availability of British farmed produce. The response should be to start planning now.
Since his appointment, Michael Gove has been quite clear about his vision for a future domestic farm policy and how the British food industry should compete in a post-Brexit world.
Direct payments currently made to farmers – based on the amount of land farmed – are to be removed. Instead payments will be made that incentivise practices that deliver so-called ‘public goods’ such as environmental protection and animal welfare. The belief of the Secretary of State is that this will pave the way for British food to achieve a ‘Golden Standard’ or as some people are calling it, become the Waitrose of global food production.
This is highly likely to impact on the competitiveness of British farming, which in turn will impact on the competitiveness of the British food industry, as the fortunes of our primary producers will be felt throughout the supply chains they supply.
In the future, many are predicting that there will be fewer farms operating as highly efficient, technology savvy and innovative businesses. It is these high performing farms that can weather the negative impacts of the imminent policy shift. But to do this effectively, they need the support of the rest of the food supply chain.
The surprise for us is that this potential change to the British supply base has not reached the psyche of food companies. Very few individual food businesses responded to the recent Defra ‘Health & Harmony’ consultation, which is worrying given that the repercussions could be far-reaching.
The ability to source British is one. It was striking in a recent informal EFFP poll of food companies that over 50% couldn’t predict where raw materials would come from in a post-Brexit world (no surprises there), and of those that did, over 80% thought they would be sourcing more from British farmers. Whilst the reasons behind these views were varied – from avoiding costly tariffs and border controls to securing domestic supply for their factories – if the majority are looking to source more British products, how easy will it be for them all to secure their supply? Will the supply chains of today be the same in a couple of years’ time?
These are big questions to address, but given their magnitude, the government has given food and farming businesses time to plan and adjust by committing to a post-Brexit transition period for agriculture. But what can they do?
There are some food businesses that have invested in building stronger ties and supply chains with their farmers. They have the advantage of strong, productive supply chains ‘back to farm’ that deliver more certainty of supply (note the troubles faced during the disastrous 2012 harvest), brand protection (note the ‘Horsegate’ scandal), the ability to manage volatile commodity markets and deliver on many aspects of sustainability at the farm level, where there are plenty of benefits to be gained.
With all the uncertainty surrounding Brexit, effective planning remains tricky but now, with a degree of clarity about the future direction of British farming, the time is ripe for food companies to up their efforts, work with their farmer suppliers and help deliver a strong food and farming industry fit for the future.
Stuart Thomson is partner at EFFP