Brexit could drive food firms offshore

Some food firms may be planning to quit the UK after the Brexit vote

Some manufacturers could relocate their operations overseas in whole or in part following the Brexit vote, a senior food industry consultant has suggested.

“The future location of supply chain assets is a key consideration,” said Richard Walters, principal consultant and head of food and drink manufacturing practice at LCP Consulting.

The final decision on relocating will rest on where the majority of their business comes from, be it country specific, EU or truly international, he added.

“Certainly, businesses need to consider, following Brexit, what their future options are in terms of their supply chain assets,” he said. This would depend on their structure and the way they deliver products to customers, he added.

“It would depend on a mix of factors, such as their customer mix, any political reasons why they may be here and access to labour and fiscal considerations,” Walters said.

‘Keeping businesses here’

One thing that might keep companies in the UK would be if corporation tax rate was reduced from its current level of 20% to 15%, as floated by former Chancellor George Osborne, he said. “It may have a pull-effect on keeping businesses here.”

However, any decision on cutting corporation tax would be down to the new government and Chancellor Philip Hammond.

“I am sure there will be changes in fiscal policy depending on what happens as part of the mix of negotiations on Brexit,” said Walters. This was one of the possible scenarios companies should plan for when considering any new strategy post-Brexit, he added.

“So, what businesses can control is sourcing and supply base,” he said. “They can control their capital investments and where they are and where they are funded from.

‘Control their capital investments’

“They can control their distribution networks and the talent and skills available to them.”

LCP Consulting advocated a five-step process to evaluate the different scenarios available to companies. This involved looking at the current structure of organisations and then posing different scenarios to evaluate how these play out using economic modelling.

“Then you can understand the best and worst-case scenarios,” he explained. It would indicate how things might change in the future and the timescales over which that might happen so that the business knows when it might need to start implementing changes.

“Nobody quite knows yet what is going to happen, but what’s great for business is being able to model a particular scenario, so as things begin to happen they can quickly adapt to that new trading environment and they know how to go about it,” he added.

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Comments (1)

A. Razzouk - 25 Oct 2016 | 01:01

Brexit also could force small business to be out of the market

The solution of reducing Corporate tax is good for large businesses that are well established. However, for a new setup Small businesses, I think they are going to lose a big proportion of their local market (if not become out of the market) as they will be forced to increase their prices. Most of the raw materials suppliers started increasing their prices between 10% to 25%, and this will affect the prices of SME's products significantly. I think the outcomes of the Brexit are already known to the business owners.

25-Oct-2016 at 01:01 GMT

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