Now that Brexit is a fact, no one knows what the long-term impact will be on exports from the Netherlands to the United Kingdom. The only thing that is now certain is the increased uncertainty about the future, and this uncertainty will damage (not only) Dutch floriculture.
In the run-up to the referendum, numerous reports were published on the consequences of a possible Brexit, including those from the big banks and the Netherlands Bureau for Economic Policy Analysis (CPB). These reports became highly relevant from the moment that a majority of UK citizens agreed to leave the European Union on Thursday 23 June 2016.
Their common thread is the difficulty in predicting what the impact of Brexit will be on the economy of the United Kingdom and the EU countries. Much will depend on the new trade agreement that the UK and the EU will be negotiating. It is expected that this will take about two years to complete.
Open-border trade
It is not yet known what the new trade agreement will look like. The international Dutch bank ING suggests that a new free-trade agreement will pose a dilemma for the EU. On the one hand, the EU wants to prevent the Brexit from setting a precedent, or that individual countries start to pick and choose from the pros and cons of EU membership. On the other hand, the EU itself will be facing higher costs, and a new trade agreement would reduce these costs for the EU as well as for the departing country.
Furthermore, the cost of a Brexit will be relatively low for countries from Eastern and Southern Europe because they are not so tied to the UK. These countries will have fewer benefits from a new free trade agreement than countries like the Netherlands, Ireland, or Belgium.
Stricter controls
It is also not yet known what the non-tariff trade barriers between the UK and the EU will look like. These trade barriers derive from the differences in technical specifications or environmental requirements that products must meet before they are sold within the EU.
Stricter controls may be imposed at the British border, which could lead to delays and higher costs for carriers. It was not for nothing that immigration policy was one of the driving forces for the Brexit supporters.
Last but not least, it is not inconceivable that other EU countries will call for a referendum on EU membership; with what kind of results?
Uncertainty
No one knows what’s going to happen. The fact is that there was a lot of uncertainty in the run-up to Brexit, and this has only increased following the definite ‘yes’ from the British people. The pound fell to the lowest level since 1985 after the results were announced. This will have a negative impact on the flower and plant trade to the United Kingdom. Flowers and plants will become a lot more expensive for people in England, Scotland, Wales, and Northern Ireland.
There is also a possibility that the British economy will slow down because investors will ignore the UK, or that companies will move away. All of these could lead to a decline in consumer confidence.
FloraHolland and the Dutch Association of Wholesalers in Floriculture Products (VGB) are both using the word uncertainty. According to VGB, wholesalers and exporters now expect a setback because there is a direct relationship between flower and plant sales and consumer confidence. ‘The number of consumers won’t change, and flowers and plants will still have an important emotional function in daily life and for special occasions. We all know Britain as a flower-loving country,’ says Lex Ebus, interim President of the VGB.
Short-term and long-term effects
Exporters expect the British to move over to cheaper products. That means additional pressure on price levels for flowers and plants. In addition to these short-term effects, it is still not clear what the effects will be in the long term. Ebus: ‘Will time-consuming border controls be imposed, spelling trouble for our fresh products, and possibly involving price increases? Will there be a change in phytosanitary guidelines for the import of flowers and plants?’
The fall of the pound has not had direct consequences for everyone up to now. Traders who supply to retail have contracts in place, which will apply for the near future. Others have taken precautions against a fall in the pound to the euro.
Richard van der Hout is Account Manager at Unique Freesia Connection Unicum in the Netherlands; they export 85% of their turnover to Britain, ‘It’s impossible to estimate what the consequences of Brexit will be; the British demand will still be there. I’m not worried about the trade agreement with the UK either, but I’m worried about the value of the pound. The value of the pound will be decisive for trading with the UK.’
Harry Brockhoff of Dutch Flower Group (DFG) knows that there will definitely be consequences. DFG makes a quarter of its turnover (EUR 1.4 billion) from trade with the United Kingdom. ‘Consumer confidence will be dented, the economy will weaken, and this will undoubtedly lead to pressure on the market. What will the cost be? That’s difficult to estimate. We don’t know which direction politics and economy will take us, and there won’t be an easy solution. As long as politicians cannot provide clarity, all remains uncertain.’
The whole chain is involved
Brexit affects the whole Dutch floricultural industry. Harm Maters, President of the leading trade organisation for contractors and fitters in glasshouse horticulture in the Netherlands (AVAG), says that Britain is not a major market for their suppliers. ‘But it’s a market with which suppliers do business on a regular basis.’
Maters expected the British market to increase for the next few years because of the retailers’ demand for sustainable products. This would involve a shift to locally grown products, and that would have meant more work for glasshouse suppliers.
Carriers are also unhappy. Arthur van Dijk, President of Transport and Logistics Netherlands (TLN), ‘Not only road transport companies but logistical service providers too will feel the consequences of decreasing transport flow between the EU and the UK.’
Outside the Netherlands
The Netherlands is not the only country trading in floriculture that is uncertain about Brexit. South American and African countries, among others, will also suffer the consequences. For Jane Ngige of the Kenyan Flower Council, the falling pound is the biggest concern, ‘Our production costs in dollars are already high. Income will decrease if the pound falls. Our biggest concern is to keep the companies in Kenya profitable.’
The trade agreements with the EU and the UK are another concern for Kenya. The Economic Partnership Agreement with the EU has not yet been signed. Ngige expects this to happen. Separate negotiations on a new trade agreement with the UK will follow. Ngige doesn’t expect this to be a major problem. ‘We are, after all, members of the Commonwealth of Nations.’
Dutch export figures to Britain
The Netherlands is one of the countries that does the most business with the UK. The United Kingdom is the Netherlands’ most important trading partner after Germany. Of the Dutch national production of goods and services, 3.7% depends on demand from the UK. This British demand is responsible for 300,000 jobs (3.3% of employment) in the Netherlands. There are only two countries, Ireland and Malta, for which the UK is even more important.
The United Kingdom is of particularly great importance for the export of flowers and plants. The UK imports 80% of their flowers and over 70% of their plants from the Netherlands. Of the total Dutch export of flowers and plants (EUR 925 million), 17% was exported across the Channel in 2015. DFG’s share was around EUR 300 million. About 2,000 employees in the Dutch wholesale are directly active in trade with the UK; the indirect number is about 10,000.
According to the market data, collected by the VGB, 70% of the 64 million UK citizens buy flowers and plants on a regular basis. The export value of flowers and plants from the Netherlands to the United Kingdom has doubled since 2000. According to reports from Statistics Netherlands (CBS), 500 Dutch trucks drive to Great Britain daily. Almost half of the products for this country consists of horticultural goods (including flowers and plants) and foods, such as vegetables, fruit, meat, and egg products. Over a third consists of commodities and containers.
Arie-Frans Middelburg
afmiddelburg@hortipoint.nl
