News | Published August 08 2019

Food industry calls for leniency on competition law ahead of Brexit

The UK food industry has reached out to the government to request the waiving of specific parts of competition law which will enable firms to directly co-ordinate with each other and redirect supplies in the event of a no-deal Brexit.

Existing regulations prevent suppliers and retailers liaising on supply and pricing but the Food and Drink Federation wants these restrictions to be lifted should a withdrawal agreement not be ratified with the EU, so firms can avoid being penalised.

The FDF said: “We asked for reassurances [from government] at the end of last year. But we’re still waiting”.

The FDF represents numerous food companies and trade associations and has expressed concern on their behalf that the new October 31 Brexit deadline could pose a number of supply issues.

The UK’s reliance on fresh food imported from Europe is greater during the latter months of the year and there is also reduced warehouse space available for stockpiling.

One FDF retailer claims that this issue is due to warehouse capacity being at 105 per cent in November, as opposed 75-80 per cent in March. They also believe that the UK would need at least 30 large-scale empty warehouses in order to store a week's supply of extra food.

FDF chief operating officer Tim Rycroft told the BBC that a no-deal could spark “selective shortages” of food that may last for “weeks or months”.

He said: "It may be the government is going to come to us and say, 'can't you guys work together to ensure that remote communities or the elderly or children don't suffer from these shortages’”.

"We're happy to help, but the Competition and Markets Authority can fine companies up to ten per cent of turnover if they are guilty of anti-competitive behaviour. So we wouldn't be able to do that without some pretty cast iron reassurances.”

Despite perceived support from the Department for Environment, Food and Rural Affairs, the reassurances the FDF wants have not yet been forthcoming.

Speaking on any potential lifting of current restrictions, John Fingleton, the former chief of the Office for Fair Trading, said: "The last time something like this happened was in relation to dairy prices in 2001 when companies incorrectly thought government words about higher prices for dairy farmers would protect them from competition law. It did not.”

On that occasion, supermarkets were hit with fines for price fixing and the FDF is concerned that this could happen again.

A government spokesperson said in response: "The UK will be leaving the EU on 31 October and our top priority is supporting consumers and businesses in their preparations for Brexit.

"We are working closely with the food industry to support preparations as we leave the EU.”

"Half of the food we eat is produced in the UK. The rest of our food is imported, with 30 per cent coming from the EU and 20 per cent from other countries. There will not be an overall shortage of food in the UK after we leave the EU."

The FDF has called on the government to issue a "letter of comfort" to the food sector to make co-operation between market rivals legal in a no-deal scenario.

The industry has also aired the view that the government is underestimating how a no-deal Brexit could impact food supply.

Speaking to the BBC, Lord Haskins, former chairman of Northern Foods, said: "The government thinks food will flow normally in the event of a no-deal Brexit. I have my doubts.

"I think there will be some panic buying, that will create shortages. I am very worried about the supermarkets getting a priority, we have to remember the schools are very important, the NHS is very important… restaurants and catering. All of them have very complex distribution systems. I don't see how that can be left to the private sector to deal with frankly.”

The likes of Domino's Pizza Group have already started pre-Brexit stockpiling, investing £7 million into storing ingredients in preparation for no-deal. The group also believes that the likelihood of supplies shortages has increased since March this year, given prime minister Boris Johnson’s willingness to take the UK out of the EU without a deal if necessary.

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Authored by

Scott Challinor
Business Editor
August 08 2019

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