Spain: A hard Brexit threatens the Spanish agro food sector

The study published by the Instituto Agrícola Catalán Sant Isidre also highlighted that a soft Brexit before March would cushion its effects on the Spanish agro food sector, reducing its exports’ growth to around 1% year-on-year.

To establish the total expected cost of Brexit for the Spanish agro food sector, it is necessary to calculate two impacts. On the one hand, a direct impact thought of the trade balance of Spain with the UK together with their investments; and on the other hand, the indirect impact based on the probable cut of CAP funds.

According to the latest data published by the Secretariat of State for Trade, for the first nine months of 2018, the UK is the fifth destination of Spanish agro food exports, with a share of 8% on the total, and 6% of total imports.

Within the diversification process of Spanish exports, one of the geographic markets where Spain has most directed its attention has been UK, especially thanks to its citizens’ evolution for higher quality products at competitive prices. In this sense, in the period 1995-2017, the size of the British market for the Spanish agro food sector has grown at an average rate of 6.5% per year, reaching a nominal value of €3,8 billion. It is expected that exports have exceeded €4 billion in 2018.

In the same period, imports have remained practically stable. From being an importer country of British agro food products (especially food preparations and beverages), Spain has become a net importer thanks to fruit and vegetables, fats and oils and fish products, and reducing its trade deficit in beverages, meat and food preparations.

A second study recently conducted by Oliver Wayman calculated that the Brexit will have a total cost  of €2,5 billion per year for the Spanish industry. Thus, Spain will be the sixth most affected country, behind Germany (with an annual impact of €9,4 billion), the Netherlands (€4,4 billion), Belgium (€3,9 billion), France (€3,9 billion) and Italy (€2,6 billion).

In addition to this and according the same consultancy, UK will be the big loser because it could suffer an impact of €35 billion due to the deterioration of its trade relationships with the EU.

The study does not differentiate among the different types of Brexit that may occur. It does indicate that the impact for all would be much lower if a future customs union were reached.

Oliver Wayman’s report focuses the shock on three sectors. For Spain, the most affect would be the automotive industry, which would lose €886 million a year, the agro food sector, with €584, and consumer goods losing another €242 million annually. The three of them account for 70% of the total damage that the Spanish industry would suffer.

The report mentions, but do not analyze, the impact of Brexit on investments, which is currently difficult to gauge. Spanish companies have invested more than €80 billion in the UK, and conversely the flux is €45 billion.

Sources: La Razón / El Mundo