Radical surgery for Sugar Regime vital to avoid further UK job losses

20th June 2005

An independent report published today suggests that unless support prices for sugar are reduced and production quotas scrapped, the falling trend in UK production and employment in the manufacture of confectionery and related products may continue. The report by Agra CEAS Consulting at the Centre for European Agricultural Studies (CEAS), Imperial College London (Wye Campus), finds that the current rules governing sugar supply in the European Union have significantly contributed to 16,000 job losses in the UK's biscuit, cake and confectionery sector in just five years. This represents an overall fall of 20% in an industry which now employs around 60,000 people.

According to the report, artificially high prices, and the system of national production quotas contained in the CAP's sugar regime, mean that UK biscuit, cake and confectionery companies have to pay inflated prices for their sugar. This in turn means they cannot compete as effectively in the global market as non EU countries or even other EU countries.

The Report finds that failure to reform the Sugar Regime is likely to mean:

- Further mergers, acquisitions and divestment of production to facilities outside the UK, likely to result in more job losses
- Further economic damage because the UK no longer has a healthy, positive balance of trade in confectionery products, a sector of huge importance to the economy. This has been eroded over the past couple of years, and now the UK imports more than it exports
- A continued fall in production in this sector of the food industry , a trend during the last five years
- Small and medium-sized producers, many of which are household names, fighting to survive

The report also finds that the elimination of sugar production quotas is the key aspect of any reform, as this will bring increased competition in the sugar supply chain.

Dr. Edward Oliver, Senior Consultant at Agra CEAS Consulting report author, said, "The confectionery and baking industry uses over 30% of UK-grown sugar, and is also an important consumer of other agricultural supplies such as dairy and cereals. Continued, artificially high sugar prices could result in even more damage to an economically important industry which is a significant employer in the UK."

Chris Tyas, Chairman of the Biscuit, Cake, Chocolate & Confectionery Association's Commercial Committee, said: "The sugar regime is archaic, trapped in a 1960s time-warp. It is causing British jobs to go overseas and damaging the UK's economy, through enforcing high prices and paying subsidies to inefficient beet growers elsewhere in Europe.

"Ironically, this is one area on which Mr Blair and M Chirac might agree , especially as sugar escaped the CAP reforms agreed in 2003. French and British farmers are the most efficient and productive growers in Europe and would stand to gain from reform."

The Sugar Regime

The independent report, from the Centre for European Agricultural Studies (CEAS), examined the impact of the EU Sugar Regime on Biscuit Cake Chocolate & Confectionery Association (BCCCA) member companies. At present, the EU sets quotas for domestic production and gives its farmers and processors a guaranteed price. Currently BCCCA members pay more than three times the world market price.

The report, which was commissioned by the BCCCA, follows a World Trade Organisation ruling in April 2005 that the subsidies are illegal and severely distort the world sugar market.

Click here to download a copy of the Executive Summary.

Click here to download the summary of Conclusions.

Click here for the BCCCA website.

For more information please contact Dr. Edward Oliver in the Wye office.

email : info@ceasc.com
Tel: UK +44(0)1233 812181 or Brussels +32(0)2 736 00 88