Note: This report includes forecasting data that is based on baseline historical data.
Summary
For the first nine months of 2021, Canadian agri-food and seafood exports to the United Kingdom (UK) increased by 25.4%, from Can$412.4 million in 2020 to Can$517.2 million in 2021.
UK recovery has slowed down due to supply chain disruptions, rising COVID-19 infection rates and issues linked to the country's departure from the European Union.
Hospitality, arts and recreation and health were the largest contributors to the UK's gross domestic product (GDP) growth in Q3 2021 following the easing of restrictions and reopening of the economy.
The UK is expected to be nearly recovered from the COVID-19 impact in 2021, with Euromonitor's Recovery Index, which indicates a recovery in economic and consumer activity to pre-pandemic levels score, estimated at 98.7 in Q3 2021. The UK's economic activity is forecast to fully recover in Q2 2022. Consumer confidence fully recovered in Q2 2021, but is set to be below pre-pandemic levels in Q4 2021. This is mainly due to fear of new wave of infections caused by variants.
| Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Recovery Index | 97.8 | 77.4 | 88.5 | 87.9 | 89.6 | 99.1 | 100.1 | 97.7 | 101.0 | 102.3 | 103.3 | 104.5 |
| Economic Activity | 97.3 | 79.0 | 91.7 | 92.5 | 93.2 | 95.2 | 97.0 | 98.5 | 99.6 | 100.6 | 101.5 | 102.1 |
| Employment | 99.8 | 99.7 | 99.3 | 98.9 | 98.8 | 98.9 | 98.8 | 99.4 | 99.5 | 99.9 | 100.2 | 100.5 |
| Consumer Spending | 96.9 | 75.3 | 89.7 | 93.6 | 90.6 | 92.6 | 94.3 | 95.8 | 98.4 | 99.4 | 100.2 | 103.8 |
| Retails Sales | 98.4 | 88.7 | 102.1 | 99.6 | 93.0 | 93.0 | 94.6 | 97.1 | 99.4 | 100.8 | 102.2 | 103.3 |
| Consumer Confidence | 95.7 | 6.5 | 23.5 | 13.1 | 52.8 | 138.7 | 137.4 | 99.3 | 117.7 | 121.5 | 124.0 | 129.9 |
Source: Euromonitor International, 2021 Note: Euromonitor's Recovery Index is a composite index which provides a quick overview of economic and consumer activity and helps business predict recovery in consumer demand in 48 major economies. The index takes into consideration total GDP and factors that determine consumer spend - employment, consumer spending, retail sales and consumer confidence. Index scores measure the change relative to the average per quarter for 2019, except for the Consumer Confidence Index whose base is the long-term historical average with length depending on country data availability. |
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A score of 100 and over indicates a recovery in which consumer demand return to 2019 levels.
Macroeconomy
In 2020, the United Kingdom's real GDP decline by −9.8% compared to 2019, mainly due to the economic downfall caused by the COVID-19 pandemic and the Brexit. The Organisation for Economic Co-operation and Development (OECD) forecast the UK economy to grow by 6.9% in 2021 and 4.7% in 2022. The UK economy started to bounce back after virtually all restrictions were lifted during the summer, mainly benefiting the hospitality sectors including bars and restaurants.
UK's GDP increased by 1.3% in Q3 2021 and 2.1% below its pre-pandemic level. Hospitality, arts and recreation and health were the largest contributors to this growth following the easing of restrictions and reopening of the economy. Accommodation and foodservice increased by 30% in Q3 2021 while the arts, entertainment and recreation services rose by 19.6%.
Household consumption increased by 2.0% in Q3 2021 and is 4.4% below its pre-pandemic level. Spending on restaurants and hotels accounted for 30.9% of household consumption.
Inflation reached 4.2% in October, its highest rate for nearly a decade. The increase is essentially caused by supply chain and labour shortages coupled with trade and immigration restrictions following the Brexit as well as an increase in energy prices.
Trade
Overall results
For the first nine months of 2021, Canadian agri-food and seafood exports to the UK increased by 25.4%, from Can$412.4 million in 2020 to Can$517.2 million in 2021.
Top export commodities in 2021 year-to-date (YTD) are non-durum wheat (Can$153.9 million), dried, kidney beans (Can$49.2 million), bakery goods (Can$44.4 million), maize (Can$33.5 million) and frozen cold-water shrimps and prawns (Can$23.9 million). These five commodities represented 59% of total Canadian agri-food and seafood exports to the UK during the first nine months of 2021.
Data for the month of September alone indicates that exports have increased by 4.0%, from Can$65.2 million in September 2020 to Can$67.8 million in September 2021. Export values increased by 5.7% from August 2021 to September 2021.
Canada's import of agri-food and seafood products from the UK reached Can$524.2 million in the first nine months of 2021, an increase of 17.5% compared to the same period last year.
Sector Analysis (Top 3 sectors)
Non-durum wheat
Non-durum wheat was Canada's largest agricultural export to the UK in 2020, with exports valued at Can$153.9 million. From 2019 to 2020, non-durum wheat exports to the UK increased by 43.2%.
Canada's exports of durum wheat to the UK from January to September 2021 were valued at Can$153.9 million (388.2 thousand tonnes) in 2021 vs Can$124.2 million (385.9 thousand tonnes) in 2020.
For September alone, exports of durum wheat to the UK increased from Can$14.1 million (46.2 thousand tonnes) in 2020 to Can$17.5 million (39.5 thousand tonnes) in 2021. Value and quantity decreased from August 2021 to September 2021.
Kidney beans and white pea beans
Kidney beans were Canada's third largest agricultural export to the UK in 2020. Canadian kidney beans exports to the UK were valued at Can$76.3 million , a decrease of −11.6% over 2019 (Can$86.3 million).
Canadian kidney beans exports to the UK were valued at Can$49.2 million (40.6 thousand tonnes) from January to September 2021 vs Can$56.6 million (43.8 thousand tonnes) during the same period in 2020.
For the month of September alone, exports to the UK increased from Can$3.7 million (2.8 thousand tonnes) in September 2020 to Can$6.1 million (5.1 thousand tonnes) in September Value and quantity increased from August 2021 to September 2021.
Bakery goods
In 2020, bakery goods were Canada's fourth largest agricultural export to the UK. Canadian bakery goods exports to the UK were valued at Can$69.5 million , an increase 50.6% from 2019.
Canada's exports of bakery goods to the UK from January to September 2021 were valued at Can$44.4 million (9.8 thousand tonnes) in 2021 vs Can$47.3 million (10.9 thousand tonnes) in 2020.
For September alone, exports of corn to the UK increased from Can$10.4 million (2.2 thousand tonnes) in 2020 to Can$7.5 million (1.5 thousand tonnes) in 2021. Value and quantity increased from August 2021 to September 2021.
Overall trade
From January to September 2021, Canada's total export to the UK decreased by −4.7% in comparison to the same period in 2020, reaching Can$12.4 billion. On the other hand, total imports grew during this period in comparison to 2020, reaching Can$6.0 billion, an increase of 2.3%.
| Category | January to September 2020 | January to September 2021 | % Growth |
|---|---|---|---|
| Merchandise exports | 12,978,459,604 | 12,373,896,216 | −4.7 |
| Merchandise imports | 5,869,149,730 | 6,007,034,958 | 2.3 |
| Agri-food and seafood exports | 412,359,361 | 517163058 | 25.4 |
| Agri-food and seafood imports | 446,114,996 | 524,123,298 | 17.5 |
| Source: GlobalTradeTracker, 2020 | |||
Other recovery indicators
During the summer, most restrictions related to COVID-19 were lifted in England, while some restrictions were maintained in Scotland, Wales and Northern Ireland. For example, to go to venues like bars or restaurants, customers must hold a pass or show a proof of vaccination in Northern Ireland, Scotland and in Wales. The lifting of restrictions was undertaken following a vaccination campaign which started at the end of 2020. In the UK, 68% of the population is fully vaccinated against COVID-19. The risks posed by new variants and the efficacy of vaccines might call for new measures. With the emergence of the Omicron variant, mask-wearing is now mandatory in shops and on public transit.
Even with the lifting of restrictions and the opening up of venue such as bars and restaurants, recovery in the UK is impacted by the combined impact of the Brexit and the pandemic. One of the most emblematic image of this has been the ongoing shortage of truck drivers. Shortage of qualified drivers in the UK exceeds 100,000, exacerbating supply chain issues impact the transportation of various goods, including food and fuel. The government announced the issuance of 5,000 emergency temporary visas in October to truck drivers to work in the UK in order to alleviate pressure on the supply chain in the run-up to the holidays season. In addition to these factors, increased paperwork and the cost of delays provoked increased price of cross-border freight with the European Union (EU), and this has resulted in increased number of haulage firms moving operations to the EU.
Labour shortage is impacting almost every industry in the UK. UK meat producers have sent meat to the EU for processing, then ship back to the UK as pig cull top 10,000. To address shortage in meat processing farms, the government has announced a plan to issue 800 emergency visas to foreigners, although the effect of that plan has yet to be felt as few applications have been received. Meat production is forecast to decline in 2021 and the rising costs, reduced demand from China and the expected reducing in government support as the UK is no longer part of the EU Common agricultural policy (CAP) will slow recovery in the sector and impact some producers to remain in the industry.
The EU-UK Trade and Cooperation (TCA) Agreement was negotiated in order to define the UK and the EU trade partnership after the former left the economic bloc. But some non-tariff issues have been noted such as the ongoing tension between the UK and France regarding the issuance of fishing licence to French fishermen. Although the TCA provide some predictability, the UK is reluctant to align with some EU's standard, including on agriculture.
Foodservice and retail
In 2020, foodservice sales in the UK fell by −36.1% compared to 2019 according to Euromonitor. The hospitality sector is currently affected by labour shortages mainly due to Brexit, which displaced hundreds of thousands of EU migrants, many of whom were hospitality workers in the UK. Many restaurants and bars had to close in the summer because they were not able to adequately staff their establishments. The foodservice industry is forecast to remain below pre-pandemic through 2022.
E-commerce sales of food and drink grew by 77.7% in 2020 in comparison to 2019 according to data from Euromonitor. The pandemic accelerated the adoption of online shopping as a convenient method by consumers. In 2020, three quarters of British consumers have shopped online. Online shopping is expected to remain in the landscape British consumer, although we might not see the same figures that during the first wave of lockdowns.
For more information
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Resources
- BBC. (December 2021). Omicron: What are England's mask rules now
- BBC. (October 15, 2021). How serious is the shortage of lorry drivers?
- Bloomberg. (October 19, 2021). Britain’s Own Truck Drivers Are Mainly Responsible for Shortage
- Euromonitor International. (2021)
- Financial Times. (November 2, 2021). UK producers send meat to EU for processing amid butcher shortage
- Food Manufacture. (December 6, 2021). 'Few' pork butchers go for Government emergency visa scheme
- France 24. (November 19, 2021). Macron refuses to ‘abandon' French fishermen in post-Brexit row with UK
- Global Trade Tracker. (2021)
- Office for National Statistics. (November 11, 2021). GDP first quarterly estimate, UK: July to September 2021
- OECD. (December 2021). United Kingdom Economic Snapshot
- Our World in Data. (2021). Coronavirus (COVID-19) Vaccinations
- The New York Times. (November 28, 2021). As U.K. Beckons Truck Drivers, Many in Poland Say ‘No Thanks’
- USDA. (October 6, 2021). United Kingdom: Food Service - Hotel Restaurant Institutional
- USDA. (June 22, 2021). United Kingdom: Retail Foods
Customized Report Service – United Kingdom recovery report
Global Analysis Report
Prepared by: Saidouba Camara, Market Analyst
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