In an interview with IEG Vu’s Max Green, the company’s managing director Paul Kelly says a genuine ‘Hard Brexit’ would force the company to downsize its UK operations. But faced with the prospect of an economic ‘meltdown’, he believes politicians will ultimately have to reach some kind of deal.
Max Green: Can you explain how Brexit is impacting your business?
Paul Kelly: It’s affecting us already with the uncertainty – mainly on labour coming in. We still have very loyal core staff [from Poland] but we’ve had two or three who’ve thought there is not a future so they’ve gone to work in Germany which is a real shame. We’re working hard on sitting down with them and explaining that the situation is not as bad as they think it is, that there is hopefully still a future here and that we’ll still be able to provide them with work.
MG: So you think you will still be able to bring people in and employ them?
PK: Yes, I think so because everyone is in the same boat – it’s not just us. 40% of all poultry workers in the UK are EU nationals – as are most of the food factories in the country. Foodservice, NHS – I think 2.8 million EU nationals work here – where we fill all those holes if they can’t get a visa I do not know. Common sense you’d think would prevail because if they’re not allowed in, the country would come to a grinding halt.
MG: Is there any way you could get British nationals to do that job?
PK: No, those days are gone. We used to back in the 1990s, but people don’t want to get their hands dirty now – they don’t want to work late or weekends. The people who are unemployed locally to us, if they came to pluck turkeys, they would last half a day and then go home - it’s not on their wavelength.
MG: Beyond labour shortages in your own business, are you concerned by potential shortages of veterinarians to work in slaughterhouses?
PK: Absolutely - if veterinarians are not allowed in, there will be no vets to inspect the slaughterhouses so the slaughterhouses won’t be able to kill the chickens. The industry is telling this to the government. We had meetings with [Defra minister] Michael Gove and he said he’d take it on board, but never once said what they would do about it. I think they are having to be seen to be saying we will stop all this migrant labour coming in. The reality is they know migrants have to come in for the country to function. When it comes to the crunch, hopefully the visas will be easy to get and maybe you won’t even need a visa for a short-term job or even a full-time job. It’s all very grey and no-one really knows. Things need to be black and white but it’s all ifs and buts.
MG: Does that make it hard to plan investments?
PK: We’ve already made a decision to move some production from the UK to Germany and Holland – because what we cannot afford is border controls. We’re moving hatching eggs and chicks so we cannot afford those delays at customs if there are any. And if there is a Hard Brexit, Dover will come to a grinding halt – there’s no infrastructure anymore to deal with customs declarations. The infrastructure isn’t there, the people aren’t there so it’s not as if they can decide overnight to bring back the old system - it won’t happen which is why they can’t have a Hard Brexit. Everyone knows that. There will have to be some kind of deal or a customs union for a period of time. If we really can’t get the work done in the UK we’ll downsize our UK business and focus on Germany and America.
MG: How are things going with the US side of the business?
PK: It’s early days in America – it’s only our second year, there's no brand awareness so it’s like we were here 30 years ago. We’re the only ones dry plucking and hanging turkeys, doing a special niche product for Thanksgiving so there's no competition as such.
MG: Returning to the UK, is the weaker pound causing problems in terms of production costs?
PK: Yes, prices are up 5.4% this year. A lot of wheat is exported so prices are up by £25 a tonne. To attract labour, we’ve had to pay the euro rate – so labour costs are up 13%. The hard bit to fix is attracting people here to work – it’s an emotional decision rather than a rational one.
MG: If costs go up, can you pass that on to consumers?
PK: Yes, we can pass costs onto consumers – I’ve watched too many businesses going out of business. We are reliant on labour and feed prices, the way I see it is that if a consumer isn’t willing to pay for a premium product we’d have to accept that. But Christmas is one day of the year, when you want the very best on the table and not look to save a fiver or tenner. It’s the one day of the year where you don’t scrimp.
MG: Is a Hard Brexit a realistic option?
PK: If there was a genuinely hard Brexit, the country would collapse – goods couldn’t come in and go out because borders would go up and there’s no infrastructure – that can’t happen. There would have to be a customs union for another x amount of time in order to put the infrastructure in place. The politicians know that because the country would come to a grinding halt – chickens wouldn’t get processed, food wouldn’t get delivered – it would be meltdown. Of course, their job is to avoid meltdown in Britain, so they would be failing miserably if that happens.
MG: Is there one thing you’d like them to do now?
PK: I would like them to get a Switzerland type relationship or better. Then maybe have another referendum in a couple of years and see where we are. The reality is the country has now been told the truth, they’re seeing the reality of Brexit which isn’t anything like they expected – a lot of people who voted thought it would be very simple. They didn’t think it would create so much potential damage to Britain – with a bit of hindsight a lot of them would probably vote to stay in Europe.
The whole thing is political posturing at the moment but that doesn’t help business does it.
The lucky thing we’ve got [in the turkey industry] is it’s a once a year business. Hopefully by spring we’ll know where we are so we can plan for next Christmas. But for a lot of other businesses, it’s weekly and monthly and they’re putting off investments and decision-making for the weekly trade that’s going to be happening in February, March, April next year – they don’t really know what that’s going to be.