No-deal Brexit MAY be a big food deal

Priyanka Mehta Wednesday 14th November 2018 10:00 EST

Pinky spends roughly £20-30 for her weekly purchase of vegetables for her family of four. And Okra and Coriander are a mandatory buy among other vegetables that the Indian family prefers for their dinner. Pinky's one stop shop, Kingsbury Fruit and Veg, UK's largest wholesaler of fresh fruits and vegetables that imports a chunk of its produce from India and EEA countries.

A no-deal Brexit may impose restrictions upon consumptions of families like that of Pinky's with an S&P report warning that the inflation could rise to 4.7% in mid-2019 as compared to 2.7% in August this year, the highest level recorded in six months.

“But the things that you need, basic vegetables, you can't do anything about it whatever is the price because for us Indians specially for the vegetarians leafy green vegetables are the only source of proteins!” Pinky shrugs off. 

Today Pinky including the grocers doesn't know what deal Mrs. May is going to bring back home after pulling Britain out of the EU and further more what impact is it likely going to have on the food industry. From food shortages to stock-piling of produce and inflated prices, the domain effect of Brexit on the food industry runs endless. And aside from the consumers, caught in uncertainty are local cash&carry shops, retailers and wholesalers who rely heavily upon third party agents to supply them with essentials or directly on the import of fresh produce from EEA.

Kingsbury Fruit and Veg

Hirjibhai Kunvarji is the owner of Kingsbury Fruit and Veg and they import close to 50% of their produce from India and the remaining half comes from Europe and Africa including seasonal vegetables like Spinach, Coriander and Okra among others. 

“Importing vegetables from India is far more expensive than sourcing it from the EU because the produce has to come on a daily business by air from India rather than the trucks which bring in the food from the EU!” 

Today, Hirjibhai imports a weekly stock of close to £40,000 and with the UK entering the last few weeks into Brexit, Mr. Kunvarji expects “the prices are likely to go up by somewhere between 10-15% today even if a Hard Brexit takes place but then again it depends on the customs and the VAT duties imposed as of now it is very difficult to say!” The City Analysts had anticipated at least an 8% increase in the food prices by the end of the transitional period of Britain's leave from EU.

Forex and crude prices

However Mr. Raunak Pandya, an IT expert for a major retail company believes that Brexit will not directly have an impact on higher food prices at least not for groceries and authentic spices that come in from India. 

“In case of vegetables, it is a different case because they are perishable items and they need to be brought in on a daily basis so it incurs more cost. Plus factor in the crude prices that have been up approximately by 6% in the global market in the last few weeks.” Mr. Pandya said

But what about other essential commodities of oil, rice, wheat and nuts among other commodities that can be stock-piled?

“Say for example the nuts, their prices have gone down in recent times but then factor in the international forex market. The pound has depreciated almost up to 10% since June and the volatility of the currency is a fundamental factor in any import-export business. This way, the nuts have become costlier. So, it is all about finding that right balance!” he explains.

While Brexit may not directly impact the import and export of food produce from other countries outside of the EU, the drop in the currency may implicitly affect the food prices and effectively result in a higher Consumer Price Index and inflated prices. But what about the food that comes in from the European countries? In what way would the import of frozen fruits, meats and other produce be impacted with an imposition on customs and VAT?   

“At this stage it is too early to predict an increase or a decrease in terms of percentages but it all depends upon on the Free Trade Agreement (FTA) that the government signs with the respective European countries.”

Third party agents and local cash and carry

Murugan Arumurugan is the owner of Lakshmi Brand Ltd. who imports 25% of his groceries directly from India and other countries which includes products like rice, lentils among other items. However, the same does not apply to the import of 15% of fresh vegetables.

“We indirectly source them from third party agents present in the UK because procurement of fresh produce is an expensive affair on a daily basis. Plus we don't even know if we are likely to sell out everything immediately as these perishable products cannot be stored for a longer while.” he said

However, Murugan is not concerned about the impact of Brexit as he feels that once Britain is free from the EU there will be more interface with the Asian markets because there is no real substitute for the Asian products. 

“There could be little changes in the pricing of the goods and not more than 5%” he expects.

But amidst all the confusion and uncertainty that lingers with Mrs. May's Brexit negotiations, what does this mean for Pinky and other families like her? Regardless of a no-deal or a Hard Brexit, prices are expected to rise in the coming days whether because of the duties levied as customs and VAT or a downfall in the Pound.

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