Twinings Owner Sees Brexit As Chance To Replace Imports
Twinings tea owner Associated British Foods Plc, spotting a silver lining to Brexit amid the gloom spreading at other U.K. companies, said leaving the European Union creates opportunities for the country’s food industry to supplant imports.
The company said it’s worried about the risk of abrupt changes to customs procedures when the U.K. leaves the EU in 2019 and welcomed Prime Minister Theresa May’s renewed pledge to seek a transitional agreement. The comments came as the company reported weakness in its sugar business and said warm weather in October hit demand at its Primark apparel chain, causing its shares to fall as much as 4.5 percent.
“Changes in legislation and trade agreements provide significant opportunities for the food industry to replace imported food and build export markets and, for U.K. agricultural policy particularly, they have the potential to benefit our group,” the company said Tuesday.
U.K. grocers have warned that the weak pound is putting pressure on costs, squeezing profit margins, as retail sales weaken. While Primark imports most of the clothes it sells in the country, AB’s food arm, which bakes bread and packages cereals, could be one of the rare beneficiaries of Brexit if retailers seek to source more of the goods they sell domestically to offset the effects of a weaker currency or more cumbersome import procedures.
Business leaders have warned repeatedly of the risk of a Brexit “cliff-edge” and other disruptions. Almost two-thirds of EU businesses that work with U.K. suppliers say they plan to move some of their supply chains out of Britain, according to a survey released this week.
AB Foods said it’s studying various Brexit scenarios but has yet to implement contingency plans. The government is “well aware” of the need for smooth customs procedures after Brexit, Chief Financial Officer John Bason said on a call.
“We’ve been planning for a future under similar trading terms to the ones we’ve got at the moment and we started thinking about what we would do if those trading terms were very different,” he said. “We began thinking a while ago about what we would do in different scenarios but until we get to those scenarios we don’t want to do any of it.”