Disruption continues
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Over two years have passed since the UK exited the EU, but feelings about Brexit remain raw for many British and European can manufacturers. Liz Newmark reports
The United Kingdom’s final exit from the European Union (EU) on 31 December 2020, after an 11-month transition period, has fulfilled predictions of disruption to the British and European can manufacturing industry, experts have told CanTech international.
Indeed, feelings over Brexit remain raw – one senior industry specialist, preferring to remain nameless, dubbed Brexit as “the most stupid decision ever taken by UK politicians.”
In the UK, Robert Fell, CEO and director of the Metal Packaging Manufacturers Association (MPMA), told CanTech International that while the EU-UK Trade & Cooperation Agreement (TCA) signed 12 December 2020, did stop economic disaster, “it by no means provided the frictionless trade that was a key component of the Brexit promise.”
The TCA allows for quota and duty-free trade in food and drink, including in cans, between the EU and UK. There is less red tape than in trade deals between the EU and Japan or Canada and features a warning that future EU and UK rules “do not include unnecessary, scientifically and technically unjustified or unduly burdensome information requests that might delay access to each other’s markets.”
Even so, as MPMA member companies operate a network of factories across Europe and with economies of scale seeing production spread across different countries, “inevitably production is negatively impacted by greatly increased customs and related administrative checks at the UK’s borders,” said Fell.
“So, commercial exporting and importing aside, even the intra-company movement of goods is slower, which has an impact on business.”
Cross-border sales are vital, given, according to European industry association FoodDrinkEurope figures, the UK is the EU’s number one export market for food and drink (£33 billion in 2021 – US$40.2 billion), ahead of the US and China. “It is the top source of imports” (£13 billion in 2021 – $15.8 billion), FoodDrinkEurope senior manager economic affairs, Louis Hinzen, commented.
However, “The geographical closeness also means a greater emphasis on just-in-time supply chain and a greater proportion of shorter shelf-life produce,” which can be affected by new trade red tape.
Hinzen also warned that “Since Brexit, EU-UK trade is no longer frictionless and food and drink manufacturers continue to face substantial non-tariff barriers with customs, sanitary and phytosanitary [SPS] measures and other food safety requirements, and with more to come. “This has a considerable impact on the administrative workload of can and canning companies, adds costs and is complicating the logistics of deeply integrated supply chains.”
Indeed, this situation is not likely to improve, MPMA’s Fell warned. “Looking ahead, there will be a divergence of regulations by our European partners over which we will have no say,” he said. “Within the EU, we were a powerful presence and decision maker in regulatory affairs. But Brexit has diminished this, and the UK remains in danger of becoming a bystander as things currently stand.”
Hinzen said that due to several postponements in installing the UK’s post-Brexit border operating model to the end of 2023, EU can exporters have so far largely avoided the full range of SPS controls including export health certificates made on food products traded between the UK and EU. But, he said, “with the new UK target operating model under development and an end-January 2024 date envisaged for the introduction of controls, EU exporters will need to revisit their preparations.
“Additionally, regulatory divergence in standards and regulation is a major concern and will continue to increase in the medium to long term, which means companies will need to navigate additional complexity.”
There is a lot to lose for a British industry where the value of UK canned food sales in the EU is estimated at £2.3 billion ($2.8 billion) and around 14.7 billion cans are produced per year, 15 per cent of the 98 billion-a-year EU, according to European industry association Metal Packaging Europe (MPE) data, the MPMA notes.
According to global market research experts Mordor Intelligence, the European metal cans market was valued at $17.78 billion (£14.54 billion in 2021 and is expected to register a CAGR (compound annual growth rate) of 2.46 per cent from 2022 to 2027.
The effect of Brexit on import and export figures of cans is harder to estimate as in 2020 and 2021, the Covid-19 pandemic significantly reduced trade.
In addition, EU statistical agency, Luxembourg-based Eurostat, only gives figures for aluminium cans and casks, drums, boxes and “similar containers” less than or equal to 2mm in width. But it is interesting to note, for example, that the value of EU aluminium exports in this category January-December 2020 to UK suppliers (€7.22 million) are notably less than that for January- December 2021 (€8.33 million).
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The UK is also in the middle of an economic and political crisis, experiencing significant increased living costs, albeit with inflation tracking the EU average, with food prices especially high – 13.3 per cent food price inflation in December and a wave of strikes. “Brexit has exacerbated this situation,” Fell argues.
“Companies are geared to cope with fluctuating economic conditions, but inflation and staff shortages are perhaps currently the most pressing.”
Fell said that difficulties in attracting suitable workers is a factor seen in most industries, and the metal packaging industry is no exception: “There are myriad reasons for this, but undoubtedly the impact of Brexit with its loss of free movement is a key factor.”
Notably, the UK Food and Drink Federation (FDF)’s communications executive Olivia Lever highlighted an FDF statement released on 11 November 2022, saying that “labour shortages are a significant brake on growth, with the vacancy rate rising to 9.1 per cent in the third quarter of 2022.”
In general, nearly 50 per cent of UK food and drink manufacturers, including for cans, have cut or paused investment projects as “they face the toughest trading conditions anyone can remember… with food and drink inflation at a 40-year high and set to rise further and more industry insolvencies in the first eight months of 2022 than in the whole of 2019,” the FDF note makes clear.
Brexit plays a part in this dismal picture – with the FDF urging the UK government to help businesses through a range of measures including, “a reduction in the costs of moving goods between the UK and the EU.” Chief executive Karen Betts also says the government must “reduce the costs of burdensome regulation.”
Fell stressed that “there are other factors” also causing these economic problems – “The pandemic and the war in Ukraine being the two most obvious.”
Nevertheless, Fell remains confident that although it will take time to get used to the post-Brexit world, “the UK remains a powerful and influential trading partner.”
He said, “I think that closer ties with our European partners will be forged as the dust from Brexit settles,” with the proviso that politicians and civil servants must ensure the UK does not end up on the sidelines of any major EU trade deals.
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In future, Fell emphasised that “Companies will need to encourage home grown talent, and I anticipate that we will see more initiatives in this respect in the future at both national and local levels.”
FoodDrinkEurope’s Hinzen added that cooperation on electronic certification for export health certificates and digital solutions could help to ease the burden on the UK’s EU export businesses.
Meanwhile, Fell said that although Brexit has caused problems for the can trade from the UK, its overall canned food sales remain healthy. He also noted that an increase in consumers choosing cans in the Covid-19 crisis has stuck.
“We saw an increase in sales during the early parts of the pandemic when there were lockdowns, and when canned food was historically doing well in times of economic hardship, and sales remain robust.”
Research conducted by data, insights and consulting company, Kantar, stated: “The challenges these issues caused for consumers contributed to the sharp rise in UK sales of canned food in 2022. Sales of canned soup for instance increased by 19.7 per cent and of tomatoes by eight per cent and remain at the highest level since 2018.”
The Kantar research data also highlighted value for money, reduced food waste and long shelf life as key drivers for the shift in UK purchasing behaviour.
In Europe, where MPE’s communication manager Kale Symons said Brexit’s impact is hard to assess as there is insufficient data, Alexis Van Maercke, secretary general of the association of European producers of steel for packaging (APEAL), told CanTech International that canned food sales for EU producers have flourished in continental Europe.
“In the last two years, a range of factors have significantly influenced consumer purchasing behaviour, including Brexit, the pandemic and the cost-of-living crisis.”
Van Maercke concluded, “We expect this trend will continue to be mirrored across Europe as the escalation of energy and general living costs continues.”
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