How Sweet Is Brexit? U.K. Sugar Giants Split Over Trade Outlook

(Bloomberg) -- Divisions within Britain’s sugar industry over how sweet Brexit will be are set to be exacerbated.

October witnesses the end of European Union quotas that curb sugar production and exports, a boon for British Sugar Plc, Britain’s only processor of the local beet crop.

Less happy is Tate & Lyle Sugars, which still faces restrictions on the raw cane sugar it can import for refining at its London factory. It’s limited to duty-free supplies from a number of least-developed nations and some shipments at reduced tariffs. Any other imports incur hefty levies.

The question is what the post-Brexit trade regime will look like, with Tate & Lyle hoping the split from the EU will offer it access to supplies at lower tariffs and treat the beet and cane industries more equally.

“There’s a very competitive white-sugar market in Europe developing, but EU tariffs and restrictions on cane sugar artificially inflate our costs, pushing us out of the market,” said Gerald Mason, senior vice president of corporate affairs at Tate & Lyle, which is owned by American Sugar Refining Inc. “We expect the U.K. to have in its toolbox in the future the ability to set its own tariff rates on sugar.”

EU Exports

Any significant decrease in tariffs would be bad news for British Sugar, which is owned by Associated British Foods Plc and has the advantage for now. It plans to export sugar to the world market for the first time in at least a decade in the next season, which begins on Oct. 1.

Associated British Foods said on Sept. 11 that it expected U.K. sugar output to exceed 1.4 million metric tons next season, an increase from 900,000 tons in the current period.

“We are making sure that we have the capacity to pilot export sales this year,” said Paul Kenward, British Sugar’s managing director. “If I have a bumper crop, then that pilot will turn into quite an exciting experience.”

For now, British Sugar is urging caution, suggesting the government takes its time removing any levies so that it has some bargaining power to secure other trade deals in the future.

“We see unilateral tariff disarmament a bit like unilateral nuclear disarmament,” said Kenward. “If you unilaterally give up all your trade protection, you no longer have anything to trade to get access for British goods.”