Dutch Flower Group is preparing for both a soft and a hard Brexit. The United Kingdom is an important market for this plant and flower trading company. “We do everything we can to ensure we’ll still be able to get into the country without any problems”, says Chief Financial Officer Harry Brockhoff.
At SuperFlora in Honselersdijk, one of the Dutch Flower Group (DFG) companies that is active in the United Kingdom, Harry Brockhoff poses in front of a poster of the Big Ben. “Good choice for an interview about Brexit”, the CFO says with a smile. Apart from SuperFlora, DFG has two more companies that distribute plants and flowers on the British market: JZ Flowers and Intergreen. “All three companies have a branch in England too.”
What is your turnover from the UK?
“The British market accounts for a quarter of our turnover. Last year, that amounted to €350 million. But those sales are under huge pressure at the moment. The total turnover of Dutch plant and flower exports to the UK decreased by 2.9% between January and July this year. Extrapolating that figure means a total of €800 million for 2018, which is 12% less than in 2016.”
Is that still an effect of the announcement of Brexit?
“It has everything to do with the exchange rate of the British pound, which has dropped by almost 20% since the Brexit referendum of 2016. We managed to hedge the currency risk in 2016, but that isn’t something you can keep doing for ever, of course.”
When did you start to do something about Brexit?
“In the beginning of 2016, we made an overview of the things that would affect us in the event of a Brexit.”
What was your first conclusion?
“It’s essential for us that after Brexit, the phytosanitary requirements for the UK will still be the same as for the EU. If they aren’t, there’s a chance that every single plant needs to be inspected before it can be imported. There’s a major task for Royal FloraHolland here. They must convey the importance of this to the negotiators in Brussels on behalf of the Dutch growers, to ensure this topic will be included in the negotiations with the British.”
What is the impact of Brexit on the trade?
“There might be import duties. We import a lot of flowers from Kenya, Colombia and Ecuador to the UK. All of those countries have trade agreements with the EU. It’s very important for us that they’ll have trade agreements with the British after Brexit.”
What is the impact on flower exports?
“We must avoid delays at the border. We’re working with fresh produce, we can’t afford a couple of days of standstill. That’s why we’re strongly in favour of a pre-clearance system. It means that customs and taxation authorities can come to us and inspect everything in advance, both in the Netherlands and in England. If the inspections take place on the ferry, and something’s wrong, the lorry won’t be allowed to get off. What happens then? Is it going to be sent back? Who’s going to pay for that? Those are the situations we must avoid!”
How are you preparing for Brexit?
“DFG has been a member of the Netherlands British Chamber of Commerce (NBCC) since 2016. We attend their events, where we also meet other traders, from the fruit and vegetable sector for example, who are facing the same problems. The NBCC brings our interests to the attention of politicians in The Hague, Brussels and London. The VGB and Union Fleurs do this too. And we’re also collaborating with flower trade organisations in Kenya, Colombia and Ecuador. Furthermore, some of our companies, which hadn’t yet been certified as Authorised Economic Operator (AEO), allowing them a smoother handling of customs formalities, are now in the process of obtaining that certificate.”
Has your lobbying led to any results?
“We’ve done everything we can. We welcomed the British ambassador at our company in the beginning of July and two weeks ago, the British Foreign Secretary, Jeremy Hunt. I personally explained the interests of the Dutch and British floriculture to them. We know that Theresa May’s government fully supports our ideas regarding three important points: phytosanitary requirements, trade agreements and pre-clearance. That was clear from the white paper that she published mid July. But it concerns a whole lot more than just the floricultural sector of course. Is there enough support within the UK to reach an agreement? And is there sufficient political will in Brussels?”
Is enough being done with regards to pre-clearance?
“The Netherlands is going to train 800 extra customs officers. The British will need around 5,000 extra customs officers, and they don’t have them yet! They don’t have any systems in place for pre-clearance either. We really need the transition period, during which we can trade as we’re currently doing, until December 2020. But whether that will happen, is uncertain. A hard Brexit can’t be ruled out altogether.”
What are the effects of the weaker pound?
“We’ve had to renegotiate prices with our customers. Hopefully we’ll know before the end of the year whether it’s going to be a hard or a soft Brexit. We’re now including a reservation towards our customers for orders after 29 March 2019, because we don’t know if there are going to be any additional costs, due to import duties for example.”
Is the British flower production going to increase after Brexit?
“Plants and flowers from the Netherlands have become more expensive for the British consumer, because of the lower exchange rate of the pound. Potential import duties on top of that would put a lot of pressure on the imports, to the advantage of locally produced products. So, yes, I do expect to see a slight increase in local production.”
Do you expect a decrease of your turnover in the UK after Brexit?
“Initially, yes, but in the long term – three to five years after Brexit – I’m sure the market will recover.”
Who pays for all the additional costs you have to make for Brexit?
“We can’t really charge anyone for those. But we can see that the weaker British pound offers some margin and pressure on price. So, you could increase your prices, but that’s tough, because the British supermarkets don’t want higher prices as it makes them too expensive compared to the low-cost retailers. Consumers would probably buy the cheaper flowers. We can talk with our customers and offer to adjust the product, for example by using fourteen or thirteen stems in a bouquet instead of fifteen and still sell at the same price. And we’ll have to work together with all the partners in the chain to try and eliminate any unnecessary costs, so that we can stay competitive.”