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1/ #Scallopgate Right @Otto_English, apologies for the delay in coming back to you, but I have been working on urgent business commitments. Finally. I have found some time trying to read up on scallops in order to understand in greater detail the impacts of a no deal Brexit.
2/ Firstly, as a housekeeping point, I have assumed there will be no change to the current export or import routes through ports, this outcome is highly likely and provides efficiencies, but I have worked on the worse case scenario rather than any potential upsides.
3/ This is also true of investment into the industry from the UK government in the event of a no deal. I have again assumed no financial assistance and factored in the worst case scenario.
4/ It is important to note that scallops is not a stand alone industry and forms part of a range of species caught by vessels. When determining any impact, some species will benefit and some will not, - that rebalancing could negate any loss on any one species.
5/ However, if a business only sells Scallops, this would not have any offset position. I could not find a sole Scallop retailer of note that didn’t also sell other species, or that had a sole UK supply base. I have therefore used a blended model as it covers most of the industry
6/ I have also not included “scallop wars” within this thread as it has no little effect on the industry should we leave the EU, it has a greater effect on France. I can answer questions on this though if required.
7/ To confirm, even though most scallops are brought in through Scotland, they do go by road through the channel tunnel, it is the fastest route into the EU (although Immingham deals with most imports).
8/ This is a 2 day trip, mostly required by the EU retailer, rather than based on the longevity of the catch, which in the right conditions can be up to 8 days. Delays at ports would have to be taken into account in any inbound critical path by the retailer.
9/ 68% of our scallop catch is sold to the EU and 27% ROW. The industry itself has struggled with lack of investment including some sinking vessels which has meant yield hasn’t been maximised, whilst yields remain lower than demand, there are output upsides.
10/ These upsides would be there even if we had remained in the EU. There are no quotas for Scallops at this time. Pricing has increased for scallops, increasing profitability and sterling has remained low for 4 years which has further increased profitability at export.
11/ Note, this is not a static situation and will always depend on demand and yield, it also depends on what vessels decide to catch, they can switch from scallops, or to scallops, depending on the availability. This then affects the price. Regardless of Brexit.
12/ In the worst case, WTO tariffs would be applied between the UK and EU & there would be a reallocation of quotas under Zonal attachment, we would maintain current trade arrangements with ROW.
13/I have included a redistribution of Quotas, as it is unrealistic to suggest we would pay full tariff and also keep the existing quotas.
14/ Over the 10 most traded species the impact of increased tariffs will see a decrease in output in all exports and imports at 3.7% but the reallocation of quotas in line with zonal attachment shows an aggregate increase in output of 10% and an increase in exports of 12%
15/ The impact varies across species, fleet segments and processing. Hake, herring mackerel stand to gain, resulting in increases of output and export. However, sectors targeting crab and scallop don’t stand to gain, as there are no quotas and so therefore no increase in output.
16/ Scallops lose based on the tariff and no benefit from reallocation of quotas, value will decrease by -4.4%, salmon also loses out here at -0.6%, although that is moderated, as a vast proportion is already sold outside the EU.
17/ It should also be noted that IF the UK paid full tariffs AND had no redistribution of its own waters, there would be a drop of about £50 million with most of the impact being in the processing sector and a decrease in jobs of 400..
18/ cross industry losses could also happen, as they supply to and from themselves. (transport, packing, power, fuel, financial sectors) again though this is balanced by the increase in processing based on the reallocation of waters.
19/ The gains for the UK come from reallocation of quotas and potentially significantly outweigh the negative impacts of an increase in tariffs, although some will be more negatively impacted such as scallops.
20/ The largest shell fish business in the UK is Macduff which was acquired by a Clearwater -a Canadian seafood business. It currently receives substantial EU funding on a TO of £70m, employing 350 people, its profit, based on its current business. would be impacted at face value
21/ ….if it does not shift focus to ROW customers, this is clearly its intent. That would be the same with all suppliers though. Markets fluctuate often in business.
22/ Barriers
- Retailer critical paths would need to change.
-Customers are never static and change suppliers, they may do so after a no deal Brexit
-Tariffs on scallops
- Retailer critical paths would need to change.
-Customers are never static and change suppliers, they may do so after a no deal Brexit
-Tariffs on scallops
23/ Upsides - blended tariffs across 10 species show an aggregate decline into the EU, but an increase to ROW, as we have greater access to more fish across a blend of species.
24/ So, as always there is nuance in any loss or gain, it’s important to reflect overall impacts, positive and negative, in order to have a balanced opinion. Some will lose and others will gain. As I have always said.
I like Scallops, unlike the mussel and the oyster, it cannot close & seal its shell completely & so can only survive in the deeper, full salinity seawater. fun fact. You can also use their shells as candle holders.
