Head of Agriculture and Food at HSBC addresses FDA group

Author: John Giles Divisional Director Promar International Ltd and President CIM FDA

undefined Allan Wilkinson, Head of Agriculture and Food at HSBC, addressed a well attended CIM FDA event in London on 29 March.

Allan gave a view of how the bank sees the future of UK and international agriculture and food – this was on the day that the government announced its intention to trigger Article 50, and so naturally, this subject was well to the fore in the discussion that followed Allan’s excellent presentation. This was wide ranging, and some of the highlights he talked about included:

At a global level, water will become one of the key issues for agriculture and food, especially in emerging markets, such as Asia, Africa and Latin America. In Asia, there will be 2/3 of the world’s population living there, but with just 1/3 of the world’s water resources. With rapid increases in consumer affluence, more demand for added value foods and more international trade across the region, demands for water will surge.

For the UK, we export about £20 billion worth of agricultural and food products per annum, with 70% of this going to the EU and we import around £40 billion of these products with again the EU being a major supplier accounting for c. 60%. In total, we import agricultural and food products from over 160 countries, but around 25 of these account for 90% of these (imports).

Since the EU referendum last year, the £ has lost around 15% of its value against both the US$ and the €. This has seen imports become more expensive, but provides an opportunity for increased UK exports.

The FAO food price index has increased by around 15% in the last 12 months. The cost of imported food into the UK has increased by between 15 – 20% and UK food inflation has increased from – 2% last year to over 1.5% this year.

We are highly dependent on trade in agriculture and food in the UK following on from the likes of the NL, Germany, the US, France, Canada and Brazil - and run the biggest import deficit after Japan and China.

Post BREXIT, there will plenty of opportunities to develop new trade deals outside of the EU, with a range of countries, including Australia, New Zealand, Switzerland, Norway, India, China, Brazil and Peru etc, but there well maybe frustrations along the way and we will need to be patient.

Any restrictions on the availability of labour might see the costs of this increase. While more automation might provide some of the answers, food and farming businesses will need to access capital and be able to demonstrate a fundamental confidence in their business.

While big is not always beautiful, many food processing businesses need to look at increasing the scale of operation in order to compete in an increasingly competitive market place. They will need to review decisions on where to locate new processing factories – either close to urban populations or still near the source of raw material supply.

It could be argued that the initial objectives of the CAP as set out 40 years ago have been highly successful, but the world has moved on from then. Post BREXIT provides the opportunity for the UK to design its own agricultural and food policy from scratch, based on what consumers and government want from agriculture, what they are prepared to support and what we might be able to learn from others.

The food sector is more exposed than any other in the UK in terms of dependence on access to labour and trade. As a result, more change can be expected here in the next 10 years than any other part of the economy.

Allan concluded by saying that for the UK agricultural and food sector to move forward post BREXIT, we need to see the changes that are coming as areas of opportunity, we need to be best of class, deal with the “here and now” (i.e. food inflation) and build on the excellent reputation that the UK has in this sector. We also must, as an industry, demonstrate exceptional skills in leadership and change management.

This was a great evening. Many thanks to Allan for coming to share with his thoughts and views from HSBC. And thanks too, to Alex Charrington from Charrington Farms in Kent, for supplying us with his excellent apple juice and cider as part of our refreshments, which was much appreciated!

We look forward to seeing you at one of our events in the future - full details will be on the FDA page of the CIM website.