‘We are in a global race for technology’: Can UK food leverage tech after Brexit?
The UK food sector faces choppy waters ahead. With the countdown clock ticking towards the country’s impending exit from the European Union, little progress has been made on negotiating a deal that safeguards supply chains or export arrangements while clarity is lacking on issues such as rules of origin regulations.
Internal division overshadows Brexit talks
“I don’t think we have been negotiating with the EU. We have witnessed negotiations within the party that is in power in the UK,” Miriam Gonzalez, partner at Dechert and co-chair of the law firm’s international trade and government regulation practice, told delegates at a Food and Drink Federation conference in London this week.
Michael Creed, Irish Minister for Agriculture, went a step further. “The complexity of Brexit was not perhaps immediately understood in the aftermath of the vote,” he suggested. “The UK has significantly geared up in terms of negotiations but a lot of the energy was spent [dealing with an] internal dynamic. It is frustrating that we are significantly advanced on the road map but are not still clear on the UK position.”
Issues like avoiding a hard boarder between the Republic of Ireland and Northern Ireland – which would require regulatory alignment as well as appropriate customs arrangements – are far from being resolved.
Barry Gardiner, Shadow Secretary of State for International Trade, stressed that this uncertainty is damaging business confidence and deterring investment. The Labour MP hit out at the Conservative government’s failure to develop a clear Brexit strategy – one that secures the backing of all factions in the cabinet.
“The key problem for every industry is the government keeps putting out ideas that get rejected by the EC and the government then shunts it down the road.”
Nevertheless, government representatives and civil servants working on the Brexit process were keen to stress the support they are putting in place to help food businesses prepare for Brexit and compete globally.
Government backs exporters
FDF export figures
In the first quarter of 2018, the EU accounted for 63.3% of all UK food and beverage exports.
EU markets account for seven of the UK's top ten export destinations, alongside the US, China, Hong Kong and Singapore.
“Being exposed to international competition boosts efficiency, innovation and investment,” John Mahon, director of exports at the Department of International Trade, insisted. “We will shortly be publishing a new export strategy… it is a framework where we are engaging with business to make sure the environment for exporting is what it needs to be.”
While Mahon said it was “not for government” to tell businesses where they should look to export, he also stressed that the UK is “very well positioned to take advantage” of growing sales in emerging markets. Acknowledging that the EU currently accounts for seven of the UK’s top ten export markets, the civil servant also highlighted IMF predictions that 90% of growth is expected to come from outside the European Union over the next 15 years.
He continued: “From historic brands with long traditions to innovative companies at the cutting edge of technology, the food and drink sector has much to add for our international partners.”
Food Tech as a point of difference?
Currently, UK food and drink products are associated with “high standards, premium brands and a deserved reputation for quality”, Business Secretary Greg Clark told attendees.
As the industry looks to the future, Clark continued, it must continue to develop technologies and capabilities that distinguish it internationally.
“I believe food and drink is on the verge of a revolution to make this one of the most tech intensive sectors there is,” he said.
Clark pointed to examples such as the “instrumental role” Nestlé’s York-based researchers played in developing a natural sugar structure that enabled the company to launch Milkybar Wowsomes with 30% less sugar. He highlighted the development of AI robots in Ocado’s operations that “can recognise and pick up every one of the 50,000 items on their website”.
Brian Holliday, MD of Siemens in the UK, noted that technological advancement is key to delivering productivity gains. “We are in a global race for technology… I would like to think we are central in that conversation on the fourth industrial revolution.”
Holliday suggested that the UK food sector benefits from areas where its expertise are highly advanced. “In the UK we have the highest level of online retail. We have skills we can build on… analytics, data, cloud-based technologies… These technologies will bring [export] markets closer to us than we have seen before."
Holliday believes there is “an appetite” for increased government intervention to support up-skilling the workforce and investment in tech adoption. He said that fiscal policy should be used to recognise the value of in-work training, while adoption and investments could be enabled through initiatives like tax breaks and advanced capital allowances.
Speaking on behalf of the government, Clark insisted that support for the industry is already being delivered through the Industrial Strategy. “I announced £90m [€103m] of Industrial Strategy money - bringing together AI, robotics and earth observation - to improve supply chain resilience in the agri-food sector. This includes support for ‘innovation accelerators’ charged with exploring the commercial potential of new tech ideas at pace.”
EU also investing in food tech
The UK is not alone in placing investment behind food tech. Indeed, the EC recently announced plans to invest €10bn between 2022 and 2027 to support innovation in the agri-food sector through part of its Horizon Europe scheme.
Reminding the audience of how crucial successful Brexit negotiations are, Dechert’s Gonzalez stressed that the future position of the UK within the Horizon project – which is open to third countries – is far from secure.
“The EU is telling us that we might not have access to Horizon. That is really vital in terms of research and investment. Israel has access. That tells you how bad the dynamics are.”
Meanwhile, from a multinational perspective, Nestlé UK communications and corporate affairs director Ian Rayson stressed it is vital that the UK remains an attractive place to invest. Rayson said Nestlé has invested £600m (€686m) in "recent years" in manufacturing that is “based in the UK but supplies markets across the EU”.
“The driver of [continued investment] is that the UK continues to be the best place to invest that money, that it has tariff free access. These factors are vital to investment decisions.”
