How No-deal Brexit Could Affect the UK Seed Potato Market
Recent analyst insight from AHDB sheds light on the possible implications of a no-deal Brexit on the seed potato sector in the UK. The category makes up around 11% of potato production in the country. Most (approx. 70%) is planted in Scotland, where unique growing conditions help to assure the high health status of the seed.
The UK usually exports 16-17% of the total GB seed crop each year. Around three-quarters of UK seed exports (approx. 70Kt) is destined for non-EU countries. Egypt is the largest market by far, purchasing approximately half of all the UK seed exports. This is followed by Morocco with a smaller but still significant proportion (approx. 10% of all UK seed exports). Within the EU, the country ships the most to Spain and the Canaries (approx. 10% of all UK seed exports). The Netherlands and Ireland are also key destinations.
Imports vary from year to year depending on the availability and price of domestic seed, and industry requirements for specific varieties. Most of this comes from the Netherlands for use by growers in England and Wales. According to APHA (Animal and Plant Health Agency), around 30Kt of seed was imported in 2018-19 for this purpose. The situation is different in Scotland. A voluntary arrangement with the industry is in place, meaning only locally sourced seed can be used. This was created to maintain seed very healthy by making sure disease is not introduced through imported material.
Barriers to Trade
In the event of a no-deal exit, both tariff and non-tariff barriers will come to bear.
- Non-tariff barriers – the UK would be unable to export seed potatoes into the EU until the UK is granted third-country equivalency. Varieties registered on UK National Lists but not the EU Common Catalogue would no longer be marketable in the EU.
- Tariff barriers – tariffs would apply to all destinations. The EU has a tariff-free arrangement with Egypt and Morocco but after UK leaves the EU, these agreements would no longer be applicable. If current tariff rates stand, these would be 2% to Egypt and 2.5% to Morocco. For EU destinations, if third-country equivalence is granted, allowing for exports from GB to the EU to resume, a tariff of 4.5% would apply. This is based on current tariff rates and assumes no trade deal is in place.
Day 1 Impacts
As most of the UK’s seed exports are to non-EU destinations, longer-term impacts would seem minimal, but a no-deal scenario could have significant impact on individual businesses in the short term. As well as tariffs, logistical delays and increased red tape around the border are likely to cause disruption and would add to the cost of doing business. This is applicable to importers as well as exporters.
Most non-EU seed is exported in November and December each year. So, as the current deadline of October 31 stands, it would be difficult for arrangements to be in place in time.
For the EU, there would be no export trade allowed at all. This would have a significant impact on those businesses with shipments to EU destinations planned for November and December. Trade routes to third-country destinations that rely on passing through Europe could also be disrupted.
Longer-term
The UK will need an agreement in place with Brussels before exports to the EU can be restarted in a no-deal scenario. There is the possibility that separate agreements with individual EU countries would need to be negotiated before trade could take place, although this may be done “en masse”. It is unclear how long this would take and seems unlikely that this would be a priority for the EU.
Some of the larger export tonnages to Europe are shipped from February to April, so if the EU does grant the UK third country equivalence soon after the current October 31 deadline, there would be a short time for an agreement to be put in place. If this happens, then the impact could be somewhat minimized. But if the EU denies the UK third-country equivalence status, or delays the decision, then this seed intended for export could end up in the domestic market. The resulting extra supply could put local prices and businesses under pressure. Saying that, for the quantities involved, the impact of this for the industry as a whole is likely to be restricted to very specific regions.