How has Brexit impacted the UK sugar industry?
Back in 2019, while the UK was waiting to see what the outcome of the Brexit agreement would be, we wrote a blog series exploring the impact a deal could have on the sugar industry. Now, over three years on, we’re returning to the subject to see what has changed in that time.
Uncertainty of waiting for a deal
While a withdrawal agreement was being established, many industries were left waiting to determine the fate of their supply relationships. During the UK’s membership of the EU, sugar imports were subject to EU tariffs. We wrote about this in detail in our blog Tariffs on sugars explained. These tariffs were dependent on a few variables, such as the raw material’s country of origin, who produced it – a mill or a refinery – and whether its use was for direct consumption or additional refining. However, the basic tariff for importing sugar from non-EU countries into the EU was €419 per tonne.
The UK’s departure from the EU meant that this tariff would no longer be applicable, yet the precise details of the new supply relationship needed to be established.
Another point that industries were waiting to see addressed concerned imports and exports between the UK and EU member states. While a member of the EU, these were tariff-free, however the UK’s departure meant potentially losing this privilege.
Both these were subject to change and the outcomes could have been very different depending on the deal we left with.
So, what has changed with Brexit?
The UK can negotiate trade deals with cane sugar producing countries
The UK is a sugar-deficit market, meaning we don’t generate enough sugar beet to supply our domestic demand and due to our climate, we don’t produce sugar cane at all. The outcome of this is that we have to import half of our sugar consumption.
The barriers on imports that the EU implemented were designed to protect domestic beet sugar producers. This meant that while some sugar refineries were operating at a loss, British sugar beet farmers were positively affected by demand. However, Brexit now means that the UK is in control of its imports – a development that has caused some divide between the British companies that will benefit and those beet farmers who fear the imports will threaten them.
Since leaving the EU, the UK has already authorised a trade deal with Australia. The agreement, which was signed on the 16th December 2021, will see a duty-free quota of 80,000 tonnes of Australian cane sugar enter the UK in 2022. This amount will increase by 20,000 tonnes every year for an eight-year period, after which there will be no restrictive tariffs.
Earlier this year, negotiations also began with India for a Free Trade Agreement that would likely include sugar.
Sugar buyers benefit from TRQ duty free import quota
In May 2020, the UK government established the TRQ duty free import quota for raw cane sugar to enter the country. This was an effort to balance support for UK producers and consumers while maintaining positive trade relations. The quota stipulated that – starting on the 1st January 2021 – for 12 months 260,000 tonnes of raw cane sugar could be imported with an in-quota rate of 0%. Once the quota threshold had been met, the out of quota tariff rate would be £28/100kg.
Though this quota was only agreed for 12 months, on the 31st December 2021 an extension to the TRQ duty free import quota was announced. This will last until 31st December 2024.
Under the TRQ, Brazil has become the UK’s largest raw sugar supplier. In 2018/2019 imports from Brazil stood at zero, but in 2020/2021 161,334 tonnes were imported.
British sugar beet farmers are exposed to cost inflation
The decision to make it easier for companies to import raw sugar into the UK has been met with criticism by UK sugar beet farmers. They have argued that while the EU tariffs protected their domestic trade, the duty-free import quota and recent trade agreements threaten their business, as they fear manufacturers will be less inclined to source sugar beet from local growers.
In response to the UK/Australia deal, the National Famers’ Union (NFU) announced that British beet growers would be unable to compete with Australian cane sugar, due partly to the fact that Australian growers are allowed to use plant protection products that are currently banned in the UK.
The NFU and other sugar beet farmers across the country are seeking to raise awareness of the uncertainty facing British growers in the face of Brexit developments.
This has met with some success, and in the autumn of 2021 the NFU sugar board and British sugar jointly announced a one-year contract for 2022 to fix the price of sugar beet at £27 per adjusted tonne, up from £20.30 in 2021. The negotiation of this deal followed the exposure to significant cost inflation suffered by British beet farmers. The agreed contract also assures the continuation of a scheme to compensate growers for losses due to the yellows virus.
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