Brexit and Cod market in the UK: No more fish and chips?

Frozen Cod

Published Jan 27, 2021

Cod, which is the key ingredient of Brits' fish and chips and one of the most consumed fish in the UK, is expected to be struck by Brexit. Unlike mackerel and herring, which are the most caught species in the UK, cod is not self-sufficient in the UK. 83% of UK cod supply is dependent on imports, and only 5% is caught domestically. Since the cod supply relies heavily on imports, the cod market price can be negatively affected by tariff changes, additional documentation, and logistics processes.

Brexit Overview

On January 31, 2020, the United Kingdom officially left the European Union. Since then, the Brexit transition period has begun, and negotiations regarding free trade, free movement, and visa issues have been ongoing throughout the year to guarantee the benefit from the UK and European Union. As both sides finalized the agreement on December 24, 2020, the new partnership between both parties went into effect on January 1, 2021, which includes the following sectors: Trade in goods and services; Fisheries; Aviation and road transport; Social security; UK participation in EU program; Internal security.

Expected impact of Brexit on the Cod market

In mid-January, British fishermen protested in front of the parliament - insisting that the No-deal Brexit signed last month has been threatening the fishing industry in the UK. According to the fishermen, the new agreement limits the UK fleets' access in the EEZ (Exclusive Economic Zone) in the member countries while the french vessels can catch in the UK water.

Particularly, cod, which is the key ingredient of Brits' fish and chips and one of the most consumed fish in the UK, is expected to be struck by the No-deal Brexit. Unlike mackerel and herring, which are the most caught species in the UK, cod is not self-sufficient in the UK. 83% of UK cod supply is dependent on imports, and only 5% is caught domestically.Since the cod supply relies heavily on imports, the cod market price can be negatively affected by tariff changes, additional documentation, and logistics processes.

Before Brexit, since the European Union and the UK used to be in the same customs territories, it was not necessary to go through the customs procedures or declarations.However, now the customs, VAT procedures, and import/export declarations are mandatory in order for the UK to enter the EU market. Although the free trade agreement with the EU can protect the cod price from spiking, the cod market price is expected to increase. The table below details the new import process on fishery products from the EU will be going through.

Source: Seafish

Source: ITC Trade Map

High Demand for Cod in the UK

Cod is one of the most consumed fish in the UK, accounting for 115,500 tonnes of domestic consumption every year. Cod is popularly used for fish and chips, a beloved soul dish for the UK. According to the National Federation of the Fish Friers (NFFF), there are approximately 10,500 fish and chips restaurants in the UK that serve up 167 million dishes annually, compared to the number of other major fast-food chains which is only 2,000. Other interesting statistics show that 80% of the UK population visit the fish and chips shops at least once a year, and 22% visit the restaurants every week.

Therefore, to meet the high demand in the domestic market, the UK imports the cod from the northern European countries, including Norway, Denmark, Iceland, and non-European countries such as India and Faroe Island. The chart below shows the share in UK’s imports on the fresh or chilled cod.

Source: Tridge, ITC World Map

According to the International Trade Center (ITC), The total number of fresh/chilled cod imported to the UK is 127,381 in 2019. Among them, the share of cod imports from Sweden accounts for 34 percent, followed by Faroe Islands (31.6%), Iceland (10.4%), and Denmark (4.8%) in 2019. The imported volume from Ireland and Faroe Islands has spiked dramatically during the past five years by 199.4% and 291.6%, respectively. Meanwhile, imports from France and Sweden have declined by 99% during the last five years, according to Tridge.

As the UK's cod imports highly rely on the EU member countries, Sweden, Iceland, and Denmark, the new trade regime under Brexit is projected to affect the UK’s import volume due to the updated customs and declaration process, acting as non-tariff barriers.

No more Fish and Chips after Brexit?

Some people insist that Brexit will not significantly affect the UK cod market. According to the Frozen Sea Fillets Association (FAFSA), the UK’s continuity agreement with non-EU countries will allow the sustainable supply of cod, and this can relieve the negative impact caused by Brexit. Also, the EU countries, whose market share reaches 60.5% in the UK, will continue to export the fresh cod to the UK without any import tariffs.

However, fish and chip lovers will face some disappointment with the expected decrease in domestic cod supplies. Unlike before, EU countries now have to go through a complex declaration and customs such as the submission of Health certificates, BCPs, and the IPAFFS check to import cod to the UK, which had not been applied before Brexit. Due to this non-tariff barrier, which hinders the fast and free imports from the EU countries, the import volume is expected to fall, causing cod to be pricier in the UK.

While it is difficult to fully assess whether the cod supply for fish and chips in the UK will be sustainable in the future or not, its exit from the EU will likely muddy the waters due to the UK's heavy reliance on cod imports from the EU countries.