Analyst Insight: No-deal Brexit in the frozen potato market?

Friday, 11 October 2019

The UK exports an average of 80Kt of frozen potato products each season, of which 94% is bound for EU destinations.

The Republic of Ireland (ROI) represents the main destination for UK frozen chips, accounting for c.39% of frozen potato exports on average (2016/17-2018/19). Anecdotal reports suggest buyers in ROI have been stocking up on supplies ahead of potential no-deal disruption.

We currently import over 600Kt tonnes of frozen processed potato products each year. These mainly end up in the food service industry.

Some businesses use British potatoes for processing abroad where costs, in some circumstances, can be favourable and then import the processed products back into the UK. If fresh potatoes are unable to be exported into the EU in a no-deal this will cause disruption.

Alex Cook

Trainee Analyst

Barriers to trade

  • Non-Tariff barriers – the UK will be unable to export fresh potatoes into the EU for processing abroad until the UK is granted third country equivalency. A full explanation of non-tariff barriers can be found here.
  • Tariff barriersUK frozen potato exports will immediately be subject to tariffs from between 14.4-17.6% into the EU assuming there is no trade deal in place. Fresh potatoes subject to an 11.5% tariff once exports resume, assuming no trade deal is in place. The full list of tariffs can be found here.

Day one impacts

After the UK has left the EU, immediate impact will be the application of export tariffs on processed potato products. These additional costs will need to be absorbed along the supply chain, reducing competitiveness against our European counterparts.

Exports of fresh potatoes for processing in EU countries will cease until an agreement regarding phytosanitary regulations is reached (third country equivalency). Realistically, this issue could take some time to reach a conclusion. Each month it remains unresolved, these potatoes will need to find a new home adding to pressure on the domestic market.  

As well as the longer-term trade friction costs there is a real risk of short term disruption around the borders as they tighten. This may disrupt both imports of inputs and exports of finished product until the new processes move smoothly. For imports while there is no tariff on frozen potato products from the EU, the disruption at borders will likely add to operating costs.

Longer term impacts

Longer term, impacts for the frozen potato market are very much dependent on what happens with tariffs. If the export tariffs are put into place, then the whole of the supply chain will need to find ways of absorbing this cost. While most of this may have to be shouldered by processors or by consumers, some could be felt at the farm gate. Frozen potato products already face stiff competition from the Netherlands and Belgium in particular, and if tariffs are in place and passed onto the purchaser, UK exports would be less attractive.

For processors, the use of other imported products, e.g. vegetable oils, for use in manufacturing processes may also face increased logistical delays, adding to input costs. While, for purchasers who process British potatoes on the continent, any tariff on fresh potatoes would need to be absorbed at some point in the supply chain.

As with many sectors, a reliance on European labour within factories could also cause further disruption moving forward.