- Most people think Britain only imports about 50% of its food. But the reality is that 80% of food is imported, including basics such as carrots and tea.
- Under a no-deal Brexit, “any slowdown would lead to shortages of lorries, drivers and food,” HSBC is advising its clients.
- Britain’s frozen-food storage facilities are already at 100% capacity.
Britain may not be prepared for leaving the EU without a trade deal but the retail analysts at HSBC certainly are. And they are saying it will be worse than most people think.
In a research note to clients dated January 3, HSBC analyst David McCarthy and his team wrote, “It is widely believed that 50% of food is imported into the UK,” he wrote. Among Conservative party members, 76% believe warnings about a no-deal Brexit are “exaggerated or invented, and in reality leaving without a deal would not cause serious disruption,” according to a recent YouGov poll.
The 50% statistic underrepresents the reality, McCarthy says. In reality, “80% of food is imported into the UK,” he wrote. The lower number “defines food processed in the UK as UK food, even though the ingredients may have been imported. For example, tea is processed in the UK, but we grow no tea — it is all imported. When ingredients are counted as imported, the real figure is over 80%.”
Food shortages would happen within days of Britain’s current customs arrangements becoming defunct. “As one ex CEO said at our Chairman’s Conference in November: ‘Carrots for sale in the supermarket on Thursday were in the ground in Spain on Monday,'” HSBC said.
Carrots will stay fresh if you keep them chilled, of course. But the UK’s frozen food storage capacity is already 100% used, according to various press reports. “In preparation for a worst-case scenario, retailers and suppliers have been stockpiling in the UK and press reports have highlighted that there is now no unused frozen food capacity in the UK,” HSBC says.
No drivers, no food
It gets worse. “Much of the food industry is staffed by overseas workers and a major labour shortage could hurt the sector. For example, there is a shortage of Heavy Goods Vehicle (HGV) drivers, with many HGV drivers in the UK coming from central Europe. As one CEO said at our CEO Forum in 2017: ‘UK distribution would grind to a halt if free movement of labour was halted and truck drivers went home,'” McCarthy’s team wrote. (HSBC did not immediately return multiple messages requesting further comment.)
“As the supply chain is finely balanced, any slowdown would lead to shortages of lorries, drivers and food.”
Of course, the HSBC team sees a silver lining. Of all Britain’s major food retailers, it sees Tesco as best-placed to handle the chaos and thus McCarthy’s team rates TSCO — down 24% from its most recent high last August — as a “buy.”