Brexit challenges & opportunities for EU & UK

seafood traders Francis Murray

24 June 2021 10 – 12AM CET

Timetable• Speaker 1. Dr. Francis Murray (Foresight Aquaculture)

Introduction & overview the UK internal marketSpeaker 2. James Green (Whitstable Oyster Company)

Brexit Impacts & adaptations by an export-dependent shellfish SME• Speaker 3. Ivan Bartolo (Seafish UK)

Regulatory challenges & the external marketSpeaker 4. Carlos Conceição (Atariya Foods)

Brexit Impacts & adaptations by an import-dependent food service SME

Q&A Panel sessions: The above speakers will be joined by: • Mr. John Bostock (Foresight Aquaculture)

Prof. Jimmy Young (Emeritus Professor applied marketing University of Stirling)Olumide Sobayo (Atariya Foods)

Key Questions

1. Brexit impacts on UK seafood trade & prices?

2. Market barriers, adaptations & potential opportunities for industry & consumers?

1. Brexit impacts on UK seafood trade & prices?

Brexit & UK fisheries – supply-side bias?• UK key belief that 1973 British EEC entry deal was unfair

• CFP: EU-based fleets landed 8x more fish in UK than British vessels in EU waters

• ‘Cod Wars’ & loss of UK distant water demersal fleet with 1976 200-mile Icelandic EEZ?

• EU sought quota share status quo up to 25years to prevent ‘economic-dislocation’

• 8 member countries most affected supporting 6,000 FTEs in entire seafood sector: esp. France, Netherlands, Ireland & Denmark

• UK sought annual quota talks on % stocks within each side’s EEZ (zonal attachment)

• 57 of 90 fish categories with quota in UK EEZ (6 in Norwegian bilateral agreement)

Spain, Portugal

Source: Guardian 2019

The EU-UK Trade & Cooperation Agreement (TCA) 31 Dec 2020

• Post-Brexit mutual tariff & quota free trade - 5 ½ year transition period• 25% increase in value of UK landings – cf. ‘80% UK Govt. promise’ • Post TCA right to repatriate 100% of EU quota allocation from UK EEZ??

Market consequences – less well articulated?• Close integration of UK-EU seafood supply chains: ‘Knock-on effects of disruption

can grind the seafood supply chain, from fishing boats to haulage, to a halt very quickly’

• EU is the largest seafood market in the world and a net importer of fish.• 71% of British seafood exports to the EU - reciprocal dependency on EU imports• European fleets in UK waters often specialise in fish less popular with British

consumers• Wider ‘market access’ & potential for tariffs on British seafood sold into EU

• Tariffs on UK processed goods using EEA/EFTA & third-country raw-materials• Trade-offs - Norwegian access to UK seafood market & UK exports to Norway• In 2019: fisheries £747m & financial services £126bn contribution to UK GDP

• Greater impacts of non-tariff barriers (NTBs) on smaller enterprises across the value-chain, export v import & sectors (e.g. shellfish) – still evolving

Other supply-side factors?• Declining quota trends

41% fish stocks in NE Atlantic zone inc. the North Sea now overfished (Oceania)

• Global warming & northward movement of migratory fish stocks

• Separate bilateral fishing deals required with EAA non-EU member states

• Annual access & quota negotiations with Norway stalled

• Future of the Kirkella; the newest & largest UK registered distant water factory vessel & last in Humberside in doubt (Icelandic-Dutch-owned)

UK seafood production baseline 2019 (LWE)

• Total capture landings 622k t (£987m) - 11% vol & -2% value YoY (due to quota reductions)UK vessels land 400k t/yr in the UK

& 200-300k t/yr abroad

• Total aquaculture 238k t• Mainly salmon; trout & mussels• 23% of UK seafood production & rising• Salmon 204k t +31% YoY (highly consolidated)• Aquaculture higher mean unit value

UK Fisheries 2019• Shellfish: Scallops, whelks, clams, Nephrops,

lobster, prawns• Pelagic: Herring, sardine, mackerel, blue whiting

• >50% UK vol but only 25% value

• Demersal: Cod, haddock, plaice, turbot, anglerfish

Source: MMO 2020

• 2019 - 5,911 UK reg. vessels• 80% <10m – higher unit value inshore spp.

Pre & post-Brexit landings UK vessels by sector 2019-2021 (LWE t)March & April

HMRC 2021

UK World Seafood Trade 2019“We export the majority of what we catch in UK vessels & we import the majority of

what we eat in the UK”

• Most UK production exported to EU neighbours & >2/3 of domestic consumption imported from world & EU

• The UK has been a net importer since 1984 - In 2019:• Imports 854k t (£3.6 billion) against Exports 496k t (£1.9 billion), • Deficits 27% volume (358k t) & 31% value ($1.7 billion) – warm water shrimp

Source: MMO

Imports

Exports

Deficit

Seafish trade balance 2019: • Total imports 721k t - £4.79/kg• Total exports 452k t - £4.43/kg• 269k t deficit worth £1.45 billion

UK – EU27 Seafood Trade 2019• Combined UK-EU trade = 42% of UK-global trade

• Volume 604k t + 6% YoY worth £2.6bn + 7.7% YoY• Average price £4.22/kg + 1.7% YoY

• UK had a 19% volume (& unit value) surplus with EU• Most EU-UK import: salmon, tuna & cod from Germany, Sweden & Denmark• Most UK-EU export: salmon, mackerel, herring, Nephrops to France, Spain &

Republic of Ireland

% of UK fish exports by species going to EU in 2019• Pelagics, cod & shellfish with

greatest export dependency(Source: HMRC)

UK - EU27 Seafood Trade 2019 (000’s mt)

47 22,5 15,1 13,2 7,2 1,8

89,5

196,3

15,8 13 3,632,4

228,7

050

100150200250

Salmon Cod Tuna Mackerel Haddock Sardines Other fish Total fishexcl.

shellfish

Shrimps &prawns

Othershellfish

Mussels Totalshellfish

Total allfish

Volu

me

(000

's m

t)

64,0 49,2 32,2 11,0 7,5 6,0

96,0

265,9

3,4 10,7 12,241,2

67,5

333,4

0

100

200

300

400

Salmon Mackerel Herring Cod Saithe Sardines Otherfish

Total fishexcl.

shellfish

Mussels Shrimps& prawns

Crabs Othershellfish

Totalshellfish

Total allfish

Volu

me

(000

s mt)

UK import total 229mt

UK export total 333mt

Source: HMRC 2021

86,3 80,256,9

107,3 107,2

64,7

0

50

100

150

200

250

2019 2020 2021 2019 2020 2021

Import Export

Volu

me

(000

s mt)

EU27 EAA/EFTA Third Country

19,0 17,5 13,9

25,020,0 20,9

0

10

20

30

40

50

60

2019 2020 2021 2019 2020 2021

Import Export

Volu

me

(000

s mt)

Pre & post-Brexit UK seafood trade volume (‘000 mt)

Jan to Apr Apr

EU27 EEA/EFTAThird

CountryGrand Total

Import -27 40 12 4Export -16 14 -24 -18

EU27 EEA/EFTAThird

CountryGrand Total

Import -34 22 -2 -9Export -40 17 -25 -36

Data source: HMRC 2021

Apr - 2019-2021 YoY % changeJan to Apr - 2019-2021 YoY % change

Fish & fish preparations

Export Export

£3,80£4,00£4,20£4,40£4,60£4,80£5,00£5,20£5,40£5,60

2019 2020 2021 2019 2020 2021

Import Export

Vol w

eigt

ed A

vg £

/kg Apr

EU27 EEA/EFTAThird

CountryGrand Total

Import -0.5 -4.0 -0.2 -1.6Export -2.4 6.0 0.0 1.3

Apr - 2019-2021 YoY % change

Pre & post-Brexit UK seafood trade -Volume-weighted mean unit value (£/kg)

Data source: HMRC 2021

£3,80£4,00£4,20£4,40£4,60£4,80£5,00£5,20£5,40£5,60

2019 2020 2021 2019 2020 2021

Import Export

Vol W

eigh

ted

Avg

£/kg

EU27 EAA/EFTA Third country

Jan to Apr

EU27 EEA/EFTAThird

CountryGrand Total

Import -0.5 -8.7 -0.2 -3.5Export -2.1 1.4 0.0 -0.1

Jan to Apr - 2019-2021 YoY % change

Fish & fish preparations

Export Export

Jan to Apr Seafood Trade Vol - by Country

0

5

10

15

20

25

30

35

2019 2020 2021

Import

Volu

me

(000

s mt)

NORWAY

CHINA

ICELAND

GERMANY

SWEDEN

DENMARK

FAROE ISLANDS

VIETNAM

ECUADOR

NETHERLANDS

POLANDImport

0

5

10

15

20

25

30

35

2019 2020 2021

Export

Volu

me

(000

s mt)

FRANCE

IRISH REPUBLIC

NETHERLANDS

U.S.A.

SPAIN

CHINA

DENMARK

ITALY

POLAND

GERMANY

LITHUANIAFish & fish preparations Export

Imports to UK 2019-2021 YoY change2021 top 12 = 142k t (68%)• Norway + 139%• Ecuador + 244%• Germany – 44%• Denmark – 43%

Exports from UK 2019-21 YoY change2021 top 12 = 74k t (79%)• France + 9% (Apr rebound)• Lithuania + 271% to 6.3k t• Poland + 70%• Irish Republic – 79%• Netherlands – 66%• Spain – 61%• Denmark – 80%• Italy – 69%• Germany -89%

HMRC 2021

Brexit impacts on farmed salmon trade• 19,410 t salmon (>£100m) exported to EU in Q1 2021, up on 11,500 t (£84m)

in Q1 of 2020 (SSPO)• Additional EU transit delay of 2-4hrs per load for health certification &

discounting – loss of comparative advantage for EU v third-country markets• £11m loss attributed to Brexit:

• Discounted market prices assoc. with customs delays• £200k/month on paperwork, logistics & veterinary costs. • ‘Teething’ v longer term-structural problems? (Ivan)

• Unharvested fish – in 2020 21% of farms (210) applied for SEPA derogations on biomass limits; on-going application re. customs delays & quality risks

Salmon fillets Avg. UK Retail Price 2017 to May 2021

Source: ONS 2021

Brexit

May 2021: £13.69/kg

Whitefish fillets Avg. UK Retail Price 2017 to May 2021

Brexit

May 2021: £15.86/kg

Source: ONS 2021

Preserved, processed fish & seafood

Brexit

May 2021: 117.1

Source: ONS 2021

Seabass & seabream retail price by form & multiple-outlet Nov 2020 & Jun 2021

Survey data

2. Market barriers, adaptations & potential opportunities for industry & consumers??

UK seafood market channels • >2/3 all sales through retail multiples• Retail sector & its UK processing supply

base highly concentrated • further amplification by Covid & Brexit • high entry barriers

• HoReCA forecast 9% rise in 2021 after 14.75% fall in 2020

• But - deferred rents, social distancing & capacity reduction, staff shortages

• >150,000 jobs to be shed post-furlough

UK species & form preferences• Preference for ‘Big 5’ species (65-75%: cod, tuna, salmon, haddock &

prawns) still increasing - but• Shift from wild caught white fish (cod & haddock) to farmed spp.

(salmon & warm water prawns)• Generally poor demand for whole fish in retail, in favour of fillets &

processed products• Especially pre-packed chilled (defrosted) & to lesser extent frozen

Pre Covid-Brexit consumption trends• Value growth but declining consumption

(lowest since 1982)• 25% decline in retail purchases over 10 years

= £5.4 billion lost sales• Demographic change, loss of cooking ability & fall

in at-home consumption (pre-Covid 19)• Ambient & frozen retail down; ‘fresh’ sales up• Demand growth for prepared fish products

& salmon

DEFRA family Food 2019

Post Covid/ Brexit demand drivers• Income inequalities: exacerbated by uneven Covid19 recovery – lower

discretionary spending?• Disposable income: UK GDP-growth revised to 5.7% for 2021; still 4%

lower in 2025 than pre-Covid/ Brexit forecast (-£1,350/person/yr)• Uncertainty re. monetary policy, inflation, exchange rates

• Sterling >5% appreciation against Euro post-Brexit

• Govt. policies for increased domestic fish consumption?

£: Euro XR Jun 20 – Jun 21

UK Gini coefficient disposable income

1977-2019

Transition challenges & opportunities• Challenging retail prospects for less familiar, hitherto exported species• Greater substitution opportunities for species that can be converted

to more popular processed forms• Increasing demand for warm-water prawns – little evidence of

domestic Nephrops substitution despite discounting• Smaller processors & wholesalers specialised in food service heavily

impacted - absorbing losses; hoping regulatory burden will ease• Loss of flexibility for small volume ‘just in time’ specialist sourcing for

high end food service • Fast food & fish & chips >40% HoReCA – ‘Staycation’ boom…

Direct Sales• Fishing vessels, processors, fish-mongers – developed or expanded

small-scale markets based on direct sales – including online• First lockdown internet food sales increase 125% & continue to grow• Vegetable box concept extended to seafood - building customer

relations based on freshness sustainability and provenance attributes• Capture of market share by disruptive technology delivery companies;

Uber Eats, Deliveroo, Just Eat etc.

% Change value internet food sales Jan 17 to Nov 21

info@eurofish.dk

Thankyou

https://www.eurofish.dk/contact-uswww.foresightaqua.com

Francis Murrayfrancismurray65@gmail.com

John Bostockjohn.bostock@gmx.com

Appendices

• UK and EU landings by EEZ & domestic/ foreign ports• Pre & post-Brexit UK seafood (fish & fish preparations) trade to/from

EU, EAA/EFTA & third-countries: value• Pre & post-Brexit UK seafood (fish & fish preparations) trade to/from

country: value

2019 Landings by EEZ (LWE)• UK vessels from UK waters:

• 81% of fish volume (502k t)• 87% of first-sale value (£851m)• Declining volume increasing value

• UK vessels from EU waters:• 15% of volume (91k t); 11% from Irish EEZ• 8% of first sales value (£81m)

• Mainly from NE Atlantic waters• EU vessels volume

• 27% (706k t) from UK waters• 68% (1.8m t) from EU waters

Source: MMO 2020

2019 Landings into UK by EU/EEA vessels (t)• 51k t –5% YoY• 57% demersal, 39% pelagic, 4% shellfish• 31% of total from Norway (demersals)

2019 Landings into EU/EEA by UK vessels (t)• 231k t –15% YoY • 37% of UK landing volume & 23% of value• 60% pelagic (mackerel & herring; reduced quota)• 36 % of total to Norway (pelagics)• 20% to Netherlands (UK reg., Dutch owned)

Source: MMO 2020

£0

£200

£400

£600

£800

£1.000

£1.200

2019 2020 2021 2019 2020 2021

Import Export

Valu

e (£

mill

)

EU27 EAA/EFTA Third Country

Pre & post-Brexit UK seafood trade value (£mill)

£0

£50

£100

£150

£200

£250

£300

2019 2020 2021 2019 2020 2021

Import Export

Valu

e (£

mill

)EU27 EEA/EFTA

Third Country

Grand Total

Import -19 14 -7 -6Export -32 19 -43 -36

EU27 EEA/EFTAThird

CountryGrand Total

Import -32 41 3 0Export -6 -7 -31 -15

Data source: HMRC 2021

Jan to Apr Apr

Apr - 2019-2021 YoY % changeJan to Apr - 2019-2021 YoY % change

Fish & fish preparations

Export Export

020406080

100120140160180200

2019 2020 2021

Export

Valu

e (£

mill

)

FRANCE

U.S.A.

IRISH REPUBLIC

SPAIN

CHINA

ITALY

NETHERLANDS

GERMANY

POLAND

SOUTH KOREA

Fish & fish preparations Export

0

20

40

60

80

100

120

140

160

2019 2020 2021

Import

Valu

e (£

mill

)SWEDEN

ICELAND

NORWAY

FAROE ISLANDS

CHINA

GERMANY

VIETNAM

DENMARK

INDIA

ECUADOR

NETHERLANDS

POLANDImport

Jan to Apr Seafood Trade Value - by CountryImports to UK 2019-2021 YoY change2021 top 12 = £724mill (70%)• Norway + 135%• Sweden + 63%• Ecuador + 157%• Iceland – 24%• Faroes – 37%• Germany – 52%

Exports from UK 2019-21 YoY change2021 top 10 = £328mill (82%)• France + 5% (Apr rebound)• Poland + 109%• Irish Republic – 77%• Germany - 92%• Italy – 74%• Spain – 68%• China – 66%• USA – 38% HMRC 2021