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Santander and the Food and Drink Federation have published their annual snapshot into the UK’s largest manufacturing sector, which highlights a number of growth opportunities both at home and overseas.
The past 12 months-plus have been challenging for UK Food and Drink manufacturers, especially for those supplying the hospitality, restaurant and cafes (HORECA) sector. While facing repeated national lockdowns and supplier disruption, businesses also experienced increased difficulties with getting products into Europe as a result of Brexit.
Despite these challenges, the industry demonstrated “incredible adaptability and resilience,” coping “admirably with everything 2020 threw at it and, crucially, it has assured the UK’s food security,” noted Santander’s resident sector expert, Andrew Williams.
Ian Wright, Chief Exec of the Food and Drink Federation (FDF), commented, “As the UK forges its new identity as an independent trading nation and looks to promote economic recovery, there remains significant headroom for growth for UK food and drink exports, both within the EU and further afield.”
Sector exports may have fallen by almost 10% in 2020 compared to 2019 but food and drink exports are still very much a UK success story, prized around the world for their quality and provenance
1. The United States
The US is the world’s largest economy and the third-most important market for UK food and drink exports (behind Ireland and France). The UK annually exports £2.2bn worth of food and drink products to the US, according to the latest Sector Bulletin from Santander and Make UK.
UK food and drink exports have increased by almost 50% over the past decade, with whisky and salmon the two highest value. However, British-made gin, beer, soft drinks, cheese and wine are also all popular Stateside.
Adverse weather conditions in 2020 created a tough year for US sugar production, leading to dramatically increased imports of refined beet sugar from several nations including the UK.
The situation saw UK sugar exports to the US increase from less than £1m in 2019 to almost £30m in 2020. Time will tell whether this is the start of a long-term growth trend or merely a one-off occurrence.
Products related to health and wellbeing have performed particularly strongly in the US, according to Santander analysis, a trend driven by consumers seeking healthier and more sustainable options. At the same time, alcoholic beverages and chocolate continue to remain strong.
Of the UK’s top 20 export markets, Canada is one of only three that saw growth during 2020 and the only one outside of Europe – the others being Poland and Norway.
A key market for UK food and drink producers, exports to Canada totalled £371.5m in 2020, up by 8% from the previous year. Santander and the FDF note that the UK and Canada have signed a trade agreement that “locks in their existing trading relationship,” and the two governments have pledged to negotiate a more ambitious trade deal during 2021.
The top five UK products exported to Canada include whisky, beer, chocolate, gin and beef, with all but whisky seeing increases during 2020 – beef by more than 110%.
In particular, Canadian consumers have shown a significant increase in demand for longer-lasting products and frozen foods. This is largely down to the country’s strict lockdown restrictions and consumers having fewer opportunities to visit shops, according to Santander analysis.
Although restrictions have begun to ease in recent months, there hasn’t been a corresponding drop-off in demand for frozen goods, as might have been anticipated. A sign that the change in buying habits may remain long-term
3. Australia and New Zealand
Despite the EU remaining the UK food and drink sector’s most important trading partner, trade growth has been largest with newer emerging food and drink partners. Exports to Australia and New Zealand, for example, have more than doubled in the past decade, standing at a combined total of £484m in 2020.
Australia sits just outside top 10 most important destinations for UK exports in terms of value and though exports down under fell by 6% in 2020, this is below the UK sector average. Exports to New Zealand, however, saw growth in 2020, albeit more slowly than recent years.
The top five UK products exported to Australia include whisky, gin, savoury snacks, spirits and chocolate, with both gin and spirits seeing 17% growth in 2020 compared to 2019.
The top five UK products exported to New Zealand are whisky, whey, gin, soft drinks and chocolate, with whisky, gin and soft drinks all seeing year on year growth of 20% or above in 2020.
Australian and New Zealand consumer trends closely follow the US, according to Santander analysis, with rising interest in health, sustainability and convenience. The past year has seen an uptick in locally-sourced staples such as bread and milk, but a strong demand remains for imported luxury goods, such as spirits.
4. Trans-Pacific Partnership
In February 2021, the UK formally applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the world’s third largest free-trade bloc by GDP. The move could unlock a number of new opportunities for UK food and drink exporters, should the application be approved.
Of its 11 current members, Canada, Australia, New Zealand, Mexico, Singapore and Japan are of particular importance for UK food and drink exporters, according to Santander and the FDF.
In 2020, UK food and drink exports to CPTPP members totalled £1.8bn, or 8.5% of all UK exports. Growth had been steadily rising since 2015, peaking at £2bn in 2019, and it’s hoped that the stronger trading ties currently being negotiated will restore the upward trajectory.
The top five UK products exported to CPTPP members include whisky, gin, chocolate, beer and sweet biscuits, with gin, chocolate and beer all seeing an increase during 2020.
The UK is Norway’s largest trading partner, with total trade between the two countries worth more than £26bn in 2019. UK food and drink exports shot up by almost 40% during 2020, more than twice that of the other two growth markets combined (Poland at 11% and Canada at 8%).
Norwegians are keen on British brands and products, according to the Department for International Trade, and demonstrates a growing interest in responsible consumption and healthy sustainable products.
Demand for international food and drink products in Norway has been steadily building over the past decade, with Norwegians particularly attracted to traceability quality and value for money. Similar to many markets, environmental packaging is also becoming a critical selling point in Norway.
In December 2020, the UK, Norway and Iceland signed an agreement ensuring that the majority of goods traded between the nations will remain tariff-free. This is an interim agreement while the UK continues negotiations for a Free Trade Agreement to come into force in 2021.
Header image courtesy of Depositphotos.