By John Dawes

By the time we go to press with this installment of my column, some threemonths will have elapsed since the game-changing vote of the British EUreferendum was announced. Despite this, we still don’t know with any certaintyhow things are going to pan out in the long term for either the pet oraquatics industries, or for anything else relating to the UK’s economy andrelationship with the rest of Europe.

Although the vote went in favour of the ‘Leave’ campaign, the margin ofvictory was not particularly convincing (52% to 48%). Indeed, it would be fairto say that the result was unexpected and that it sent shock waves around theworld. Not even the ‘Leave’ campaigners were expecting to win, as a result ofwhich they were caught unprepared and with no detailed plan as to how tohandle the situation.

Not surprisingly, chaos and confusion took centre stage, with accusations andcounter-accusations being directed at campaigners and voters alike by bothsides of the electorate. Disgruntled voters and ‘Remain’ campaigners, forinstance, accused the ‘Brexiters’ of using false data and claims in theircampaign. For their part, some two million expatriate Brits living within theEU complained that they had been unjustly denied their right to vote justbecause they had lived outside the UK for more than 15 years. It is, in fact,widely believed that if these expats had been allowed to vote, the resultwould have been different.

Whatever the case might have been, within days, a petition was set uprequesting the British parliament to re-run the referendum. In less than aweek it had amassed over 4.1 million signatures, making it one of the most-signed – if not the most-signed – petition in history. When UK petitionsattract a certain number of signatures (way below that obtained by thispetition), British law dictates that the matter has to be discussed inparliament. In this particular case, the date for the debate was set as 5September. Consequently, the result was not known at the time of writing thispiece or going to press with this issue of PIN.

SOME POSSIBLE IMPLICATIONS

So what could all this have to do with the ornamental aquatic industry? Well,quite a lot, the extent depending on what transpires over the coming months,and especially once the British government decides to activate Article 50,which it must do to open the doors to the tough EU exit negotiations that lieahead. Even once Article 50 is activated, which, according to the latestpronouncements from the UK government, will not be until 2017, the exitprocess could take two years or more to be completed, so its effects will befelt gradually over an extended period of time.

Interestingly, while the nation as a whole voted 52:48 in favour of leavingthe EU, the UK pet trade in general voted 54.7:45.3 in favor of leaving, alittle above the national trend. No figures are, however, available for any ofthe subsectors of the industry, e.g. pet accessories, foods, ornamentalaquatics, and so on. The result, just like the overall vote, surprisedmany…but perhaps it shouldn’t have done. The fact is that, for high streetretailers (and not just for those specializing in pets and/or aquatics) thebenefits of remaining within the EU are not as easily identifiable as forlarge corporations with multi-million export programs (see below for commentsrelating to exports).

For example, following EU edicts, UK high street pet and aquatics retailers,like all other retailers, have to charge a level of Value Added Tax (VAT) whenselling their products (20%) which is paid by the end consumer. Leaving the EUmeans that there would be flexibility regarding this tax, with the possibilitythat it could be lowered. Legally, there would even appear to be no obstacleto eliminating it completely, but this would be very unlikely. It’s muchlikelier that it would be re-named and reduced. Such a move would be welcomed,both by the pet and aquatics retail sectors and by the public, who have notalways appreciated that VAT is not a retailer-imposed charge, but a governmentone, and have therefore complained directly to shop owners.

Retailers were also forced by the EU to sell products in Metric units, i.e.kilograms and grams, and metres and centimetres, rather than Imperialmeasures, i.e. pounds and ounces, and feet and inches, something that was metwith considerable resistance by the die-hards when the respective laws werefirst implemented, with such non-observance being subsequently penalizedheavily. Such an imposition could be removed once the UK leaves the EU, sinceit would no longer have to abide by EU rules. It could also, one assumes,choose to return to the Fahrenheit temperature scale, abandoning the Celsiusone, as well as to pints, quarts and gallons, although, in the last instance,the differences between a US gallon and an Imperial one would be likely toremain.

IMPORTS AND EXPORTS

With the immediate drop in value of the GBP against the US dollar and Eurowhich resulted even as the vote count was under way, imports into the UKbecame more expensive. In the first days following the referendum, the priceincreases were expected to be significant (perhaps 10% or more). However, asthe dust has begun to settle, the value of the pound has been rising again(though modestly at this stage), meaning that the financial blow may not turnout to be as severe as predicted. Add to this the considerable powers ofingenuity and creative marketing that exists within the aquatics retailsectors, and it is not unreasonable to expect that
the impact will be cushioned.

On the more positive side, exports became cheaper overnight and, thus, moreattractive to overseas buyers. This could have a significant effect on thegeneral pet sector, which exports large quantities of dog and cat food andsupplies. Live aquatic exports, though, are more modest, with a few notableexceptions, such as exports of tropical marine fish and invertebrates, somefoods and equipment. Should the present currency exchange conditions persistfor any considerable length of time, these exporters of
live aquatic organisms, aquatic plants, reptiles, amphibians, foods,medications and aquarium/pond equipment are likely to benefit, with thebenefits becoming more apparent for the larger corporations with extensiveexport portfolios.

SOME CONCERNS AND OPPORTUNITIES

Having said this, the UK’s Pet Industry Federation (PIF) is concerned aboutpet sector exports because, as it says, the vast majority of companiescurrently exporting goods do so within the EU. It has therefore expressed thehope “that the government will be able to reassure (those) businesses thatthey will continue to be able to do so confidently without incurring farhigher costs which could force some into difficulty.”

Exporters of marines –as well as other exporters – could benefit from Britain’s exit. PHOTO: JOHNDAWES

The PIF maintains that pet welfare is one of the least regulated areas of EUlegislation, “with laws covering pet welfare largely devolved to the memberstates… While the UK is likely to still be bound by World Trade Organization(WTO) rules on imports and exports, there could be opportunities to preventthe import of animals…if they represented a disease or welfare risk, alongwith implementing other laws on animal welfare which might be better thancurrent EU standards.”

The Federation therefore believes that leaving the EU may not necessarily be abad thing for animal welfare, since the UK could design and adopt its ownanimal and welfare laws, free (but it’s not clear to what extent) from EUcontrols.

The British Veterinary Association also believes that leaving the EU will have“a significant impact on matters of interest to the veterinary profession,particularly in relation to regulation, education and welfare planning, butalso in terms of animal welfare, research, surveillance and animal movements.”

Quite how the above will/could affect the pet and ornamental aquatic sectorsis not clear at this stage, but there are, obviously, implications for ourindustries which will, hopefully, become clearer further down the line.

SRI LANKA’S GSP WORRIES

As I write these lines, there have been no official statements relating toornamental aquatics from any of the countries which export to the UK…with theexception of Sri Lanka. The UK is currently the second highest destination forSri Lankan exports, with sales of US$1,031 million in 2015 (the US is thehighest at US$2,803 million).

Currently, Sri Lanka trades its export products under a standard GSP agreementwhich grants it several benefits with regard to tariffs. The GeneralizedSystem of Preferences (GSP) is an autonomous country- specific policy thatpermits tariff reductions, or possibly duty-free entry of certain imports fromdesignated developing countries, Sri Lanka being one of these.

The authorities there are, consequently, concerned that Sri Lanka may losethese tariff concessions for the bulk of its exports (presumably, includingornamental fish, which are included in a list of top export products) toWestern members, thus leaving it to compete with other suppliers from theentire world. Clearly, this could have a significant effect on its fast-expanding exports of aquatic organisms and rein back the growth which it hasexperienced in recent years. To what extent this will be the case will, ofcourse, depend on the tariff structure that the UK will introduce upon exitingthe EU.

This is one of the sitesin Sri Lanka where the pearly or fire rasbora (Rasboroides vaterifloris) iscollected for export. The country is concerned that its ornamental fishexports might suffer if it loses its current GSP status (see text fordetails).
PHOTO: JOHN DAWES

INTO THE UNKNOWN

There can be no doubt that the road towards the UK’s exit from the EU will bea very bumpy one. The prophets of doom are still predicting that the outcomewill be disastrous, while those who still maintain that the vote was just,fair and correct maintain that things won’t be that bad and could actually bebetter for Britain.

The undeniable fact is that we are dealing in unknowns. Further, the UK is amajor force in the commercial world, whether in or out of Europe. Therefore,some accommodation will, no doubt, be negotiated, especially since Britain’sdeparture will have numerous consequences for the remaining EU Member States.

There’s too much at stake for doors to be irrevocably shut because of theimpending departure. I think that, deep down, we all believe this. We mustalso believe that our ever-resilient and vibrant industry will find workablesolutions to all the challenges that lie ahead. I firmly believe this to bethe case.

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