Cheesemaker is one small company that highlights just how complicated international trade and expansion strategies have become following the UK's decision to exit the European Union.
Quicke’s, the Devonshire-based, traditional clothbound cheesemakers are worried about the future facing British cheesemakers now that the UK has voted to leave Europe.
With an annual turnover of around £3.5million, over a third of their business is export, primarily to the US and Australia but they also have distribution within Europe as well.
The company was vocal in the Stronger In campaign, so how are they faring two months on?
“Europe had been a future focus for our export strategy prior to the referendum. We're now reviewing this,” says Tom Chatfield, Quicke’s Sales and Marketing Manager.
Quicke’s export around 40% of their cheese by value and have grown exports more than 75% in the last three years.
Key markets are the USA and Australia and they currently don't have huge exports to Europe but sell respectable amounts to Spain, Italy and France.
Chatfield says the company hasn't yet been hit by the movements in Sterling since the EU vote, noting that while exports have increased they have only done so in line with their expectations prior to the referendum outcome.
“We haven't yet realised the currency shift as our core exporters (for US and Australia) tend to buy currency a few months out. We may see some increase based on weakened currency into 2017, though we don't expect this to change our sales very significantly,” says Chatfield.
Initial data following the EU vote does however suggest that there could be a Sterling-premium coming as UK exporters, as surveyed by the CBI, have reported orders to have had a 2 year high in August.
Of course a stronger Pound would mean costlier imports, but as more than 98% of Quicke’s ingredients are produced on the farm, Chatfield says they fortunately won’t have to raise prices anytime soon.
Changing Strategy: No Proactive European Expansion
Following the EU vote the core focuses haven't changed at Quicke’s though management are less certain about how effectively they may be able to implement their strategy for export.
They certainly expect to have to work harder for the same result.
“The period that concerns us most is the gap in between our departure from the EU and the finalising of trade deals with the key partners. We may see WTO tariffs kick-in during that gap and those would create a huge spike in the cost of bringing our goods into foreign markets that we would expect to heavily impede the sort of momentum that we've enjoyed in recent years,” says Chatfield.
Management have, as a result, put their plans to explore new export markets on ice.
“It doesn't feel sensible to be adding complexity in dealing with new markets with the looming uncertainty. We are watching and waiting for news on how Britain will keep itself in the game for global trade,” says Chatfield.
As a result of the EU vote Quicke’s have shifted from a proactive to reactive stance to pursuing new European markets with Chatfield saying they will no longer be going into these markets to foster relationships and create momentum.
“We are consolidating within existing export markets instead.”
Regulatory Complications Arising from Brexit
For Quicke’s the big worry is that Brexit will muddy the compliance and regulatory regime faced by British cheesemakers who operate on an international scale.
Management are concerned that with regulatory bodies such as the FDA in the United States, UK cheesemakers will struggle to hold court in the same way that they have done as part of the EU Bloc.
“When something shows up that could affect hundreds of diary businesses across Europe, that carries a lot of weight. If something that affects half a dozen cheese farms in Britain proves contentious, that's easier to dismiss,” says Chatfield.
Chatfield wants Therese May and her new government to do whatever it takes to have us setup with trade deals that keep Britain competitive by the time we leave Europe.
“If we are left outside for a couple of years while waiting for the ink to dry, I fear that we will be in much worse shape for it,” says Chatfield.