New Zealand / Press Releases
NZ Exports To UK And EU Threatened By Brexit Uncertainty
by Liam Harrison
Apr 03 2019

The United Kingdom (UK) is currently New Zealand’s sixth largest export market and is expected to import over $1.4 billion of goods from New Zealand in the 2018-19 financial year. The chance of the UK exiting the European Union (EU) without a deal has increased in recent times, and IBISWorld analysts believe this would present a significant threat to New Zealand exports to both the EU and the UK.

New Zealand primarily exports wine and agricultural goods such as lamb, honey and apples to the UK. According to Senior Industry Analyst Liam Harrison, a no-deal Brexit would increase custom restrictions on these goods, apply tariffs on some goods that have been previously exempt and disadvantage companies that rely on re-exporting from the UK to the EU.

“A no-deal Brexit would likely increase the costs and procurement times of New Zealand exports, reducing demand for these products. In event of a no-deal Brexit, the UK reverts to the World Trade Organisation (WTO) rules regarding trade, which would force the UK to place tariffs and quotas on certain products,” said Mr Harrison.

In this case, the UK would not be allowed preferential treatment of certain nations without a free trade agreement, as the WTO’s ‘most favoured nation’ rule requires that any alterations to tariffs or quotas must apply to all countries trading with the UK. New Zealand and the UK are currently in negotiations to sign a free trade agreement. However, the time frame for an expected signing is currently unknown.

“To reduce the impact of stricter customs checks as a result of Brexit, deal or no-deal, New Zealand and the UK have quickly signed a Mutual Recognition Agreement, which allows UK customs to recognise authorised certifications from New Zealand and drives customs to speed up checks. While this may mitigate the effects of Brexit, it is still likely to threaten New Zealand’s exports to the UK in more ways than one,” said Mr Harrison.

Wine Exports

The UK is currently the second largest export market for the New Zealand Wine industry, which is valued at $2.6 billion in 2018-19. New Zealand currently represents just under 8% of all wine imports into the UK, and over 20% over all wine imports from countries outside the EU.

“A no-deal Brexit would threaten New Zealand wine exports to the UK, particularly as numerous exporters use the UK as a re-exporting hub to sell to the EU. A no-deal Brexit would remove any benefits of re-exporting from the UK,” said Mr Harrison.  

“However, New Zealand has entered negotiations to sign a free trade agreement with the EU. This would eliminate the need to re-export goods from the UK and allow producers to sell directly to the EU,” said Mr Harrison.

Meat exports

The UK is also the third largest market for meat exports. The New Zealand Meat Processing industry is currently valued at $9.4 billion.

According to IBISWorld data, Lamb, mutton and other sheep meats are expected to account for over 95% of New Zealand’s Meat Processing industry exports to the UK. A no-deal Brexit would make EU markets more difficult to access for UK sheep farmers, encouraging farmers to divert more product to local markets. This would potentially reduce demand for New Zealand lamb, driving down exports to the UK.

“The exit date, March 29th, also presents a significant concern for exporters due as it is close to Easter, which is one of the most popular trading periods for lamb products. Exported products may face congestion at the border, incur expensive tariffs or even be denied access to the market altogether,” said Mr Harrison.

The future of New Zealand exports to the United Kingdom

Despite the Mutual Recognition Agreement, a no-deal Brexit would likely cause delays at the UK border, increasing supply chain costs and making it more difficult for UK retailers to stock goods imported from New Zealand.

“Exporters are likely to invest in portable refrigeration units and other systems to prevent perishable goods from spoiling, which will certainly increase the price of these exported goods from New Zealand,” said Mr Harrison.

According to Mr Harrison, a post-Brexit world is unlikely to be friendly to businesses reliant on trade between the UK and New Zealand until a free-trade agreement is agreed upon by the two nations.

“Without a free-trade agreement, a lot of New Zealand wine may spend a few extra years in the cellar before sale,” said Mr Harrison.

Industry

UK exports

 

Share of industry exports

Share of total exports to UK

Wine Production

22.5%

27.8%

Wool Scouring

13.9%

2.8%

Apple, Citrus and Other Fruit and Nut Growing

9.7%

6.4%

Meat Processing

6.3%

34.5%

Source: IBISWorld


IBISWorld Industry Reports used in this release:

Wine Production in New Zealand

Wool Scouring in New Zealand

Apple, Citrus and Other Fruit and Nut Growing in New Zealand

Meat Processing in New Zealand

 

For more information, to obtain industry reports, or to speak with an analyst, please contact:

McKenna Moroz
IBISWorld Media Relations Representatives – Anne Wild & Associates Pty Ltd
Tel: +61 2 9440 0414
Mobile: 0431 781 445
Email: mmoroz@awaassociates.com.au