Sep 27, 2018

‘No-deal’ Brexit could cost food retailers and their supply chain £9.3bn, says Barclays

supply chain
Laura Mullan
2 min
The new report, Scale, Disruption and Brexit – a new dawn for UK food supply chains?, shows that a no-deal Brexit would mean that food retailers would be affected by an average of 27% on food and drink goods entering the EU.
Failing to reach a Brexit deal could cost UK food retailers and their supply chain £9.3bn (US$12.2bn), according to a report by Barclays...

Failing to reach a Brexit deal could cost UK food retailers and their supply chain £9.3bn (US$12.2bn), according to a report by Barclays Corporate Banking.

The new report, Scale, Disruption and Brexit – a new dawn for UK food supply chains?, shows that a no-deal Brexit would create an average tariff of 27% for food and drink supply chains. 

With grocery margins typically around 3-5%, additional costs will likely be passed on to consumers, Barclays says.

“The food and drink industry is one of the country’s most important sectors, employing millions of people across the UK,” comments Ian Gilmartin, Head of Retail at Barclays Corporate Banking.

“For the good of both UK business and consumers, the potential impact on our producers and grocery retailers should be front and centre of Brexit negotiations.

“Some products would avoid tariffs, even in a no-deal scenario, but for most goods the effect of an increased tariff burden would be extremely damaging, and cheaper goods would be the hardest hit.

“71% of our imported food and drink comes from the EU, and 60% of our exports go to the EU. A positive agreement on trade is essential if we are to protect UK exporters and avoid significant price rises for UK consumers.”


A no-Brexit would deal would result in varying tariffs for different product types. For instance, Barclays reports that fully processed food and drink products, like orange juice, will attract the highest tariff of 31%.

Semi-processed food and drink like white sugar will have a 29.5% tariff meanwhile primary products and raw materials like bananas will have a 9.7% tariff.

Beyond these surcharges, some produce will also attract  ‘specific duties’, with Barclays noting that this will disproportionately impact products like meat, cereal, olive oil and wine.

As Brexit negotiations press ahead, other consumer trends are also providing challenges and opportunities for the sector.

Whilst shoppers are visiting stores more often — trips rose 14.3% from 2013 to 2018 — they are buying fewer products per visit with average spend slumping 8.5% during the same period.

At the same time, more and more consumers are turning to discount supermarkets like Aldi and Lidl, leading the ‘Big Four’ to see a 10% decline in market share since 2011.

Therefore, Barclays notes that the Brexit negotiations could “add an extra layer of uncertainty.”

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Jun 23, 2021

Japan Seeks to Revive Stalled Semiconductor Industry

Elise Leise
3 min
As international supply chains falter, the Japanese government intends to incentivise foreign chipmakers to build localised foundries

Post-pandemic, Japan has seen the consequences of relying solely on foreign imports for its semiconductors. Over 64.2% of its chips are usually imported from South Korea and Taiwan, leaving the country dependent on its neighbours. Industries from auto manufacturers to consumer electronics firms wait for chips, to no avail. But now, the Japanese government looks likely to put real funding behind its semiconductor industry, with top officials emphasising their support.


Domestic supply chains have never been more important. Rather than remain tied to international shipping routes during shortages and delays, governments are doing everything in their power to develop local lines of supply. But the question remains: can Japan pull it off? 


How Will Japan Pay For It? 

Herein lies our first issue. Japan’s debt has rapidly increased over the past few years, and the semiconductor industry will need roughly a trillion yen—US$9bn—in this fiscal year alone. This cost, however, pales in comparison to what Japan could lose if it fails to keep up with Europe and the US. Both nations have launched aggressive funding measures to revive their local semiconductor industries. And if Japan refuses to invest due to its debt, it could slow down progress in fields ranging from artificial intelligence to autonomous driving. 


According to Tetsuro Higashi, the former president of Tokyo Electron and Japan’s top government advisor in semiconductor strategy, ‘If we miss this opportunity now, there may not be another one’. Yet one advanced wafer fabrication factory can cost more than US$10bn, and any money poured into the industry will go fast. That’s why Japan, rather than invest trillions and trillions in failing domestic firms, is considering a second option. 


What Do They Plan To Do? 

Japan now intends to look abroad and convince overseas chip foundries to come to its shores. Its past failures mostly centred on trying to merge domestic firms that were already going through tough times. ‘This sort of made-in-Japan self-reliance approach hasn’t worked out well’, said Kazumi Nishikawa, a director at the Ministry of Economy, Trade, and Industry’s IT division. ‘This time the goal is to offer a strong incentive for an overseas logic foundry to come to Japan’. 


As follows, Japan will now reach out to industry partners and leaders in other countries, including the industry heavyweight Taiwan Semiconductor Manufacturing Co. (TSMC), to build Japanese bases. According to the South China Morning Post, the heart of Japan’s mission is a US$337.2mn research and development project in Tsukuba that will involve TSMC and more than 20 Japanese firms. ‘I think we need to cooperate with our overseas counterparts’, said Akira Amari, a senior member of the ruling Liberal Democratic Party. ‘[And] TSMC is the world’s top logic chipmaker’. 

Indeed, if that’s Japan’s strategy, the future looks bright. TSMC recently set up a venture near Tokyo to research energy-efficient 3D chips with several Japanese partners. And in the future, the multinational chipmaker may consider expanding its Japanese operations—that is, if government incentives pave the path forward.

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