No-deal Brexit and UK Coffee industry

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During all this Brexit process, the main difficulties for the coffee industry have been a total lack of clarity around the Government’s plans for the future in case of a No deal with the EU, which is also simplified by the name of “Hard Brexit”.

There has not been yet a clear communication problem between the political-economical decisions makers and the coffee industry community.

The government is lacking a clear program in case the UK would leave for good the EU.

This situation doesn’t help at all the UK Coffee importers and roasters that have been left without a clear guide during all this long process. Of course, the coffee industry is not the only one left alone. There are so many UK companies that have no clue of what will happen in case of a no-deal.

What will happen in case of a No-deal confirmation?

The Brexit apparently will take place on or within the 31st of October 2019. In case of a rigorously “No” to stay inside the EU, the first outcome would imply a concrete return to World Trade Organization (WTO) rules which means different commercial tariffs:

  • tariffs on roasted coffee beans imported from the EU would be set at 7.5%;
  • the tariffs on instant coffee will be set at 9%.

This would mean a more expensive bill to pay and higher costs on the manufacturing and supply chain of the UK coffee industry.

These tariffs will immediately raise the price of the b2b and b2c chain, leading to a strong reduction of:

  • consumer choices;
  • varieties of beans available on the UK market;
  • reduction of brands.

The economic and environmental impact won’t be ideal for small companies, European Investors and start-ups.

The most negative aspects of all of this could be the impact the Hard Brexit will have on each single importing categories:

UK imports £398m, 175000 tons of green coffee from the rest of the world and all the imports of UK coffee-related products has got more value in EU than of the rest of the World, which is £516m (EU) versus £463m (RoW).

UK imports from the EU principally roasted coffee for a total value of £255m and soluble coffee for £181m.

Many EU countries export their roast and ground coffee to the UK.

UK Imports are dominated in the following order:

  1. France (£67m),
  2. Germany (£66m)
  3. Italy (£48m).

A different analysis must be done for soluble coffee.

The soluble coffee It is supplied in the UK by internationally based brand owners who, being bigger companies, usually have multiple manufacturing operations across the EU.

The UK coffee soluble market is roughly equivalent to the rest of the EU MARKET combined! It is huge!

Which other things could influence the coffee industry performance?

Coffee beans are a dollar-traded commodity. Due to the fact that this political situation has not been clarifying for so long in these past years, this has brought the weakening of the pound in the international trading market, which means it adds high costs through foreign exchange to UK coffee companies and investors in being able to import, roast, trade or sell the coffee.

What about coffee workers in the UK?

Many coffee investors are scared there will be a lack of baristas. Here you can read a few recent articles regarding this problem:

Few studies claims there will be a shortage of baristas: https://www.insider.co.uk/news/britain-faces-brexit-barista-shortage-14193409

The London coffee scene is rising day by day as said by the Independent journal: “6,517 new coffee shops are expected to crop up nationwide by 2023, which could lead to a shortage of baristas”. This is going to lead to, what I like to call, “a new coffee disease”.

There are not so many British people working in the Coffee Industry as usually young British people unconsidered this job for one primary reason: it’s a low paid job. London is one of the most expensive capital city of the World with expensive living cost so British people prefer not to work in the hospitality industry.

What frightens London is that it can’t find enough baristas to replace the leaving of the European after the Brexit. At present, less than 10% of British people are working in the hospitality industry and it’s even worse in the case of the Uk cafè chain Pret a Manger, who estimated that just that only one to 50 candidate are British.

What is certain is that the UK economy, especially in a few sectors, relies also on inward migration of EU workers. In the case of the UK leaving the EU without a deal, there won’t any more labour free movement.

UK will adopt a migrant applications visa system to which will allow only the best EU skilled workers to permanently live within the country. It sounds something similar to the rules in force in Australia.

This could cause a few problems to start-ups, companies that are looking to fulfil specific positions and could affect the time spent in developing a coffee business idea.

Which are the sectors that could earn about a no-deal?

For any sectors that will lose, some will gain. Read this cool and interesting article on how no-deal Brexit could benefice the UK pressure equipment makers, which are also used in the coffee industry.  https://www.imeche.org/news/news-article/brexit-may-present-opportunities-for-uk-pressure-equipment-makers

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