It’s been a turbulent start to the new year for the seafood industry. New post-Brexit requirements have been causing delays in export supply chains that allow fresh seafood to reach markets in the EU.
Shellfish exporters in Scotland are particularly vulnerable to these impacts because high-value premium catches typically need to get from boat to market within 24 hours to ensure they remain fresh. Any delay can lead to a fall in prices or customers refusing to accept goods.
This blog provides background to the ongoing challenges being faced by the Scottish (and UK) fishing industries in getting seafood to EU markets.
What was the situation before EU exit?
When the UK was a member of the EU, and during the transition period until 31 December 2020, UK exporters enjoyed tariff-free and frictionless access to the EU single market. In effect, this meant that goods which were fit for sale in the UK could also be sold across the EU and there were no barriers to exports reaching other EU markets.
According to data from HMRC, from 2016-19, on average, three-quarters (76%) of all seafood exports from Scotland went to the EU per year. These exports were worth an average of £703 million per year.
What’s happening now?
When the transition period for the UK’s exit from the EU ended on 31 December 2020, goods exported to the EU were subject to new rules requiring customs checks and new paperwork such as catch certificates, export health certificates and customs declarations.
The new EU-UK Trade and Cooperation Agreement did not do much to address non-tariff barriers, such as the requirement for export health certificates and sanitary and phytosanitary checks on the movement of animal products between Great Britain and the EU.
Early in the new year, reports of the impact of these changes began to emerge. Consignments of Scottish seafood destined for EU markets were being delayed or simply not making it to the EU market at all. These barriers to trade continued into the second week of the year.
By 12 January 2021 there were reports of boats being tied up in harbour and fish prices in Peterhead, the UK’s busiest fishing port, falling by 80%. There were also reports of some UK boats landing their catch in Denmark to get a better price for their catch by landing at ports in the European Union. These issues were not limited to Scottish seafood exporters. There were also reports of problems in England and Wales.
What’s causing the delays?
Customs requirements causing supply chain delays, also referred to as ‘non-tariff barriers’, are a consequence of the UK’s exit from the single market and customs union. Examples of new requirements contributing to these delays are:
- Customs and border inspection requirements for products entering the EU.
- IT systems required to trace consignments to their export destinations.
- Certification and document requirements such as catch certificates and export health certificates.
These requirements are not “new” in the sense that they apply to all exporters seeking to place goods on the EU market from outside the Single Market. As a result, they are standard requirements for any non-EU Member State exporting seafood to EU markets, but they did not apply to the UK when it was a member of the EU.
It is also worth noting that COVID-19 may be adding further delays due to staff shortages and testing requirements. For example, lorry drivers require a negative COVID-19 test from the previous 72 hours to enter France from the UK.
Recent reports have also indicated problems associated with situations where multiple consignments are loaded onto the same lorry for export. The challenge for hauliers in this situation being that goods within mixed consignments will need to meet different regulatory requirements and be accompanied by different paperwork, all of which needs to be checked at the EU border. Because of the logistical challenges of this, DFDS Logistics Scotland temporarily halted exports involving multiple consignments in the same lorry.
An overarching problem reported is that exporters and governments in the UK have not had to deal with these requirements before, meaning that there is a lack of expertise and experience in handling the process (see the statement below).
Were these impacts avoidable?
Most of the impacts discussed above are a direct result of the UK’s exit from the EU. In theory, the new export requirements could have been avoided if the UK Government had negotiated continued membership of the single market and customs union. However, the UK Government was clear from an early stage that this was a red line it was not willing to cross.
As a result, many of the challenges in getting goods to market following the end of transition were predictable in the sense that the non-tariff barriers to trade (outlined above) were likely to come into play. Both the UK Government and Scottish Government published guidance in 2019 setting out new requirements and processes for exporting seafood to the EU after Brexit.
The seafood industry was also aware of potential impacts. For example, the Scottish Creel Fisherman’s Federation set out its concerns in written evidence submitted to the Culture, Tourism, Europe and External Affairs Committee in May 2020:
“these products have to reach the end user alive. Any compromise to this removes the premium end of the value. Dead on arrival, is reflected in huge discounting and in some cases, no recoverable value at all. It can also result in cost to remove and destroy this product […] , if we lost 2-3 hours at border or custom’s controls, the whole logistical operation would collapse.”
However, a survey of members by Scotland Food and Drink at the start of December 2020 suggested that 72% felt unprepared for Brexit. Getting properly prepared for the new regulatory environment led to Scotland Food and Drink writing to the Prime Minister at the start of November 2020 to request the following:
- a six-month grace period before the new systems came into place
- further preparation of operational arrangements for enabling the smooth passage for seafood consignments across the Channel
- financial compensation for producers, processors, manufacturers and distributors who encounter losses as a direct result of border or market disruption, initially for a 3-month period.
There was limited time for seafood exporters to test new systems and understand the precise, practical arrangements. This is because the deal between the UK and EU setting out the new trading relationship was not agreed until Christmas Eve, just a week before the end of the transition period on 31 December, and no ‘grace period’ was negotiated.
Specific guidance such as the final version of the UK Government’s ‘Border Case Studies’ was not published until six hours before the end of transition on 31 December.
What responsibility does the Scottish Government have in seafood exports?
The Scottish Government had no formal role in negotiating the terms of the UK-EU trading relationship, and consequently the new customs requirements. The UK border is a reserved matter, so responsibility for managing exports of seafood through key export ports such as the port of Dover is managed by the UK Government and its agencies.
However, the Scottish Government does have responsibility for supporting the Scottish seafood industry to prepare for the impact of EU exit and new export processes.
Responding to the current situation, UK Government Ministers have referred to £200 million of funding provided to the Scottish Government to prepare for Brexit. This was Scotland’s Barnett share of UK-wide funding provided to prepare for Brexit, rather than a specific grant for the seafood industry.
SPICe has contacted the Scottish Government to clarify how this funding has been allocated. The Scottish Government’s response states the following points:
- A total of £194.8m in EU Exit preparation consequentials from the UK Government was allocated from 2017-2021. Brexit consequentials for 2020-21 have been absorbed into the Scottish Budget for 2020-21.
- These funds were allocated for Brexit preparedness across all policy areas and not limited to supporting the seafood industry. The funds have been used for dealing with e.g. legislative changes, logistics, compliance, enforcement, information and communications.
- Allocation of these funds from the Scottish Government has included £5.7 million to Food Standards Scotland which has enforcement functions for export health certificates. This allocation pre-dates the end of the transition period before seafood export issues were reported and the situation may have changed since.
The Scottish Government has the option of providing additional funding to support the seafood industry from the Scottish budget if it wishes to.
As mentioned previously in this blog, border delays and the resulting fall in fish prices have driven some Scottish boats to land their catch in Denmark. One Danish fish market reported that up to 40% of fish sold at its auction this year had come from Scottish boats.
This has a knock-on effect for the processing industry in Scotland’s coastal communities, who rely on fish from the catching sector. A SPICe briefing published in 2019 reported that there were 139 seafood processing sites in Scotland in 2018, providing 8900 jobs and accounting for 39% of sites in the UK and 46% of the jobs. The concentration of processing sites in places like Aberdeen, Peterhead and Fraserburgh ensured that, in 2015 alone, the industry generated more than £725 million in turnover and £116 million in Gross Value Added for the region.
Seafood processing in Scotland – regional distribution of sites and FTE jobs (2018)
What’s the long-term outlook?
Scottish seafood exporters and processors will fear that recent events are a precursor to a more permanent structural change in the industry. While it’s likely that problems will be ironed out and export processes will become more efficient, there is no going back to the frictionless trading arrangements the UK previously had as an EU Member State. New requirements discussed in this blog are here to stay for the foreseeable future.
The long-term prospects of the wider Scottish fishing industry will be pinned on the new fisheries agreement contained within the UK-EU Trade and Cooperation agreement. However, industry representatives such as the Scottish Fishermen’s Federation have been highly critical of the outcome of this deal. Furthermore, most shellfish exporters do not target species covered by quotas, meaning that gains achieved in negotiations will offer little comfort. This deal will be discussed in a separate SPICe blog.
Before the new year, many seafood businesses were struggling to weather the storm of the impact of COVID-19 lockdowns on export markets and port closures. Without further support from both the UK and Scottish Government and finding a solution to the new logistical challenges to exporting to the EU, some business state that they face the prospect of bankruptcy within weeks.
It’s not clear at this stage if or when the 24-hour timescale supply chains required to deliver fresh seafood from Scotland to EU markets can be achieved following the UK’s departure from the single market. The demand will continue, the worry for the industry is that supply will be sought from elsewhere.
Researcher, Environment, Rural Affairs, Constitution and International Research Unit