Africa and Asia set to become UK’s biggest suppliers in wake of Brexit
An overwhelming 43% of retailers anticipate a reduction in produce sources from the EU and around a third say they are considering sourcing from a different region.
Africa is expected to be a key supplier, with 38% of respondents expecting to see more African products in the UK. Asia is expected to increasingly provide for the UK supply chain, retailers added, with 52% leaning towards India as the biggest supplier and 43% towards China.
The results are part of the latest Barclays survey, which quizzed retailers on their import plans once Britain has left the EU.
“Exchange rates are identified as a primary concern, with four in five retailers expecting a negative impact, 70% are reviewing currency hedging following the vote,” the researchers wrote.
Ian Gilmartin, Head of Retail & Wholesale at Barclays, told the Financial Times: “Following the vote, retailers are looking to shift their sourcing out of Europe, as the pressure on their cost base intensifies. There’s a great deal of uncertainty on the outlook for tariffs.”
Africa viability
However, with Africa’s growing food demands in-country and concerns food supplies will be insufficient for even its own population, does the continent really have the capacity to become a major UK supplier?
Land which isn’t desert or jungle tends to be a harsh landscape for crop growing, with inconsistent rainfall. Fragmented politics within the continent can also be an issue for exporting, experts say.
Around 30-40% of food grown in Africa is lost due to lack of quality and standards in some countries and poor supply chain infrastructure in others, said Susan Evans, managing director, Europe Tompkins International in a presentation. Food safety and security is affected by rainfall patterns (either too much or too little), land degradation, low agricultural techniques and infrastructure issues.
Yet, though North Africa imports due to arid conditions, Southern Africa exports has advance infrastructure and processing, she said, noting Namibia, South Africa, Kenya, Zambia are all advanced in processing and export, Evans said.
These countries could be promising exporters to the UK.
Supply chain issues
Despite a negative impact on costs anticipated due to potentially unstable exchange rates, UK retailers expect to absorb the costs for shoppers.
“Less than a third expect cost changes to result in price increases for consumers,” the researchers note.
Gilmartin said it is: “Reassuring to note that most retailers don’t intend to pass on costs to their customers and will instead look for other ways to tackle supply chain issues.”
Yet, it is unclear what plans are to counter issues with supply chains.
“A separate survey of retailers and consumers carried out before the Brexit vote found that close to two thirds of retailers (63%) believe that their supply chains are not cost-effective.”
At least consumers appear to be holding their end of the bargain with a 1.1% retail sales increase marked by KPMG this year in July compared to last in spite of Brexit.
”This month's solid sales figures may come as a shock to some given the slew of early indicators suggesting that consumer activity was slowing in the wake of the referendum result,” said Helen Dickinson, chief executive at British Retail Consortium.
“However, little has materially changed for most UK households in the wake of June 23, so it is not surprising to us that sales are simply responding to their normal underlying drivers. A heavy month of promotions proved very successful in appealing to bargain-hungry shoppers, boosting sales growth to 1.9 per cent, ahead of the 12- month average of 1.2 per cent.”
Commenting specifically on the food and drink sector within the KPMG report, Joanne Denney-Finch, chief executive at IGD added that UK shoppers seem to be recovering from the aftershocks of the referendum.
"Given the sharp drop in food and drink spending in the immediate aftermath of the referendum, a return to sales growth during July was very encouraging,” she said, noting: “As some of the economic and political uncertainties were resolved, shopper confidence began to recover.”
“The next few months' sales figures will hinge largely on whether we see the return of food inflation, following the drop in sterling.”
