Estimated Additional Costs
- It is estimated that the additional, non-tariff costs per EU order will be between £216 and £276. This could apply to a full articulated lorry-load, or a single box, making it disproportionately more expensive to send smaller orders to the EU. Transport costs also vary, depending on the scale of the order - larger orders will attract more competitive prices than sending a single pallet.
- The majority of this additional expense results from the cost of employing a vet to inspect the order prior to shipping, which is estimated at between £140 - £200 per order. The additional £76 covers additional time taken to process an order (£11) and the cost of a Common Veterinary Entry Document (estimated at £65), to allow the order to enter the EU destination country.
- Many small producers send smaller orders to customers in the EU, which makes the additional cost per order proportionately higher. This could potentially price their products out of the market, making business to the EU unviable and ultimately deterring smaller businesses from exporting there.
Red Meat Exports
- Around 7.5% of Scottish red meat sales (including 5th quarter) are sold to customers in the EU. Other export markets of significance are in Asia, whilst the UK domestic market is the primary outlet, accounting for almost 91% of sales.
- Exports provide premium product sales opportunities, assisting processors with carcass balance and in spreading their commercial risk beyond the home market. Typically, the cost of exporting is greater than selling in Scotland or the wider UK market.
- The export market is highly competitive and any additional costs involved with exporting to the EU post-Brexit may put sales to these markets at risk. For existing throughput, exporters are anticipating that they will have to absorb the additional administrative, trading, vet and transport costs, which is likely to reduce profitability. For new business, there is the potential to build costs into the trading arrangements, though this may make the product too expensive.
- Scotland’s lamb sector is under greater threat than beef, as its reliance on exports is greater than for beef, i.e. 26% of total lamb sales are exported, versus 6% for beef. A greater proportion of lamb products are also exported to the EU.
- Customer feedback highlights that some EU customers are looking at other EU supply options, with some already sourcing lamb from other countries such as Spain. Doing business with other EU operators will be easier, quicker and less expensive than doing business with UK operators.
- There may be disruption to supplies of 5th quarter product to Europe and for those who use the port of Rotterdam for the groupage of 5th quarter material for onward travel to Asian markets.
- The UK currently benefits from the Trade Agreements that the EU negotiates. The lack of new trade agreements negotiated to date by the UK will delay the development of new opportunities in new markets.
- Industry hopes that new country trade agreements may open up alternative market opportunities beyond the EU. Some exporters have been taking advantage of Quality Meat Scotland’s trade development activities to assess these opportunities, whilst others have been independently visiting potential customers in new markets. Other markets beyond the EU offer opportunities for the Scottish red meat industry, particularly in Asia and North America.
- The UK government has announced, in addition to import tariffs, Tariff Rate Quotas (TRQs) on beef being imported into the UK. This new proposed post-Brexit tonnage is less than the current volume imported, providing an opportunity to develop sales of Scotch Beef domestically. Feedback from industry suggests that there should be more marketing support to help raise awareness in the UK. Market insight also suggests that there is a growth opportunity in the domestic market to increase on-shelf presence both in Scotland and in the wider UK market.
- New Zealand is currently not fulfilling all of its sheep meat import quota to the EU, due to increasingly attractive opportunities in Asia and North America. This offers sales potential for Scotch Lamb to the EU, providing excessive tariffs can be avoided. Within the EU, the Halal market continues to grow and this is a market that Scotland does not currently supply. In order to do so, it would have to address, sensitively, issues surrounding changes to abattoir procedures.
|UK Imports – BEEF||Current Situation||Post-Brexit|
|Tariff Free (0%)||340,000 tonnes||230,000 tonnes|
|Tariff Free (0%) Northern/Southern Ireland arrangement||n/a||30,000 tonnes|
|Reduced Tariff under pre-arranged EU quotas||40,000 tonnes||55,000 tonnes|
|Total Imports||380,000 tonnes||315,000 tonnes|
|Possible volumes subject to new UK import tariffs (current situation – Post Brexit position)||75,000 tonnes|
- Scottish red meat exporters are currently operating on a ‘business as usual’ basis until the terms of any Brexit deal becomes clear. If/when this happens, they will determine what strategies and plans to adopt.
- The uncertainty over the Geographic Indicator scheme and how it will be supported presents a reputational risk to the Scotch Beef and Scotch Lamb brands.
The Scottish Red Meat Supply Chain
- There is concern that the shortage of vets in Scotland will affect their availability in-plant to approve Export Health Certificates. The new Certification Support Officers (CSOs) may help, although there is limited information regarding the new service and whether it will be approved by the EU.
- Lack of skilled labour may affect the longer-term operations and sustainability of meat plants. The sector will require to find new ways to attract workers and to automate more processing tasks where economically viable.
- Haulage is a two-way process and more expensive imports may mean less EU product is brought into the UK. As a result, total revenues may reduce, leading to higher shipping costs for the industry in the UK, particularly for those exporting.
- Most of the Scottish red meat exported to the EU travels via the Channel Tunnel and Calais. There is currently no Border Inspection Post (BIP) at Calais, although one is being constructed. These developments could mean that a lot of the UK exports to the EU could be channelled through the new facilities placing a high demand on the new infrastructure. The processing time at the BIPs is currently unquantified. In the early post-Brexit stages, there is a risk that severe delays in the processing of lorries could have a knock-on effect on orders arriving on time at their end customer destinations.
- The farming sector is an important stakeholder in the red meat supply chain and the uncertainty that surrounds Brexit is having an effect on farmers too, as animal numbers continue to decline.
This report makes a number of recommendations to help the industry mitigate against the impact that Brexit may have on the Scottish red meat supply chain. It is hoped that these recommendations will be explored with the industry and key stakeholders, who will help prioritise which should be taken forward in the short to medium terms. The suggested lead partners for each action have been highlighted in bold.
- The red meat industry needs to collaborate to determine how vet costs can be reduced, to ensure that orders remain competitive.
Organisations Responsible: SAOS, SAMW, FSS
- Consider the establishment of a red meat transport liaison working group including transport industry representatives and exporters, to explore opportunities for collaboration, as well as establish efficient routes to market. This group should also consider whether a sealed container system could be implemented to save time at the BIP.
Organisations Responsible: SAOS
- Businesses have highlighted the need for more support to help them understand the new tariffs and paperwork. Information, workshops and 1:1 support would be beneficial as soon as possible, once the timings of Brexit are known, to help businesses navigate the processes and look at the opportunities for new market development. Clear and detailed information should be made available on appropriate Public Sector and Trade Organisations’ websites and communications materials to explain the potential procedures and costs involved in exporting to the EU post-Brexit.
Organisations Responsible: QMS, APHA, SDI, SAMW
- It will be critical to ensure that the new administrative procedures are developed, launched and implemented competently, to minimise dispatch times and costs and ensure there are no risks associated with the paperwork that may lead to the load being rejected at the BIP. Staff within the Agencies will also need to be fully trained in the procedures to be able to provide accurate guidance to companies.
Organisations Responsible: APHA, QMS, SDI,
- There is a need to communicate with industry regarding the role of the CSOs, how industry should interact with them and how they will support vets.
Organisation Responsible: FSS, Scottish Government
- The changes to the administrative procedures and processes provides an opportunity to review the provision of export certification, with a view to maximising efficiency and reducing costs, while ensuring compliance with safety and quality assurance standards. Examine how technology can reduce costs – e.g. remote inspections via on-site cameras. This would also reduce the burden on an overstretched veterinary service.
Organisations Responsible: SAMW, Scottish Government, FSS
- Further research is required to understand how a collaborative approach to exporting might help the industry develop new commercial opportunities. The extent and nature of any collaboration would be determined by the needs of those businesses who wished to collaborate, but could examine routes to market, identify current blockages, examine new customer market opportunities and marketing activities.
Organisations Responsible: SAOS, QMS
- Market Development work to encourage 100% coverage of Scotch Beef and Lamb in UK multiple retailers, to explore further opportunities in foodservice, as well as investigating the public procurement route.
Organisations Responsible: Scotland Food & Drink, QMS
- A co-ordinated UK market approach needs to be undertaken around the marketing of Scotch Lamb to encourage more domestic consumers to buy this protein. This needs to include the retailers and major foodservice companies.
Organisations Responsible: QMS, Scotland Food & Drink
- An investigation of the Halal lamb opportunity should be undertaken, looking at the potential and risks of this market for the Scottish red meat supply chain
Organisations Responsible: SAOS, QMS, SAMW, SDI
- Innovation work needs to be defined and developed to drive efficiency and productivity on-farm and throughout the supply chain. This could include, for example: the improvement of efficiency and adherence to specification on-farm to reduce waste in the chain; the tracking of lorries and loads using sensors to understand the journey times and implications of the new EU borders; the sharing of market insight to highlight market performance, competitor activities, and opportunities both in retail and foodservice markets in the UK and international markets; and investigating how ScotEID data could benefit the processing sector.
Organisations Responsible: SAOS, QMS, SDI, CENSIS, SMAS
- Extend the shelf-life of red meat products through enhanced hygiene and production processes, to guarantee the offering remains competitive and resilient to lengthening transit times.
Organisations Responsible: SAMW, Make Innovation Happen (MIH)
- Employ a proactive recruitment strategy to ensure there are sufficient key staff to allow operations to continue and support all parts of the red meat supply chain. Consider economically viable automation opportunities.
Organisations Responsible: SAMW, Skills Development Scotland, LANTRA, SMAS
- Establish a working group to maximise the value and opportunities from 5th quarter products and remove blockages from the supply chain.
Organisations Responsible: SAOS, SAMW
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