Yahoo Finance Beet it: why Britain's sugar industry is not so sweet
It is already a symbol of Britain’s old imperial reach, a scourge of public heath officials and a flashpoint for campaigners against the nanny state.
But sugar has now found a new role in the modern UK - as a battleground for post-Brexit national ambition amid a tussle between domestic suppliers and foreign imports.
At the heart of the war are two companies, British Sugar and Tate & Lyle Sugars, fighting to secure a bigger share of the market now that Britain has left the European Union.
British Sugar’s heartlands stretch from East Anglia, north though Nottinghamshire and into Yorkshire, with four factories close to local farmers growing sugar beet.
Its arch-rival, Tate & Lyle Sugars, is based in a factory in London’s East End, where it has 850 staff and has operated for more than 140 years. It relies on sugar cane, shipped in from the tropics and refined in the capital.
Just over half of the UK’s 1.9m tonne market for white sugar is held by British Sugar, which sells directly to other producers as well as to consumers through its Silver Spoon brand. The remainder is split roughly equally between Tate & Lyle and imports from European beet producers.
The two businesses have long fought each other for control of the market, but now their arguments have spilled over into a full-blown legal battle after the High Court agreed with British Sugar that a tariff break on cane sugar could face a judicial review.
Under trading arrangements inherited from the UK’s time in the European Union, cane sugar imports face a tariff of £28 per 100 kilograms, unless it comes from within Europe or from countries categorised as ACP (African, Caribbean and Pacific states), or LDC (less-developed countries).
Tate & Lyle brings in most of its raw cane sugar from countries such as Belize, Guyana and South Africa, paying rates that are generally higher and more erratic than the global price due to higher production costs.
At the end of last year, the Trade Secretary, Liz Truss, moved to unilaterally allow 260,000 tonnes of raw cane sugar to enter the UK in 2021. British Sugar says this is effectively a subsidy to its Docklands nemesis, which was sold by Tate & Lyle to US group American Sugar Refining in 2010.
“I don’t understand why they’ve singled out this one American company for special treatment,” says Paul Kenward, managing director of British Sugar.
A freedom of information request by Tom Clarke, who grows sugar beet on a 1,000-acre farm near Ely in Cambridgeshire, shed some light on the Government’s reasoning.
He acquired heavily redacted documents that reveal the Department for International Trade decided to slash import prices in an effort to keep jobs viable at Tate & Lyle, and stop its factory becoming “an economic waste”.
The battle highlights a key challenge for the Government: does it believe in protecting British farmers and production, or fighting for an idealised free market? It is also a personal headache for Truss as Europe’s biggest beet refining factory is in her constituency.
Britain will gradually drop tariffs on Australian cane sugar imports after striking an outline deal with Canberra earlier this year. Critics of the tariff reductions warn further deals in that model could feed through to cheap cane sugar imports that would undercut English beet farmers.
Séan Rickard, an independent economist and former chief economist of the National Farmers’ Union, says British Sugar and its growers can hardly claim to be surprised by the apparent shift taking place.
“They believed the half-promises from Boris Johnson that there would be protectionsm,” he says. “Now they’re discovering [protections are] not there, and they’re panicking.”
For Tate & Lyle, the autonomous tariff rate quota granted by Truss is just one step towards correcting a historical wrong. Its senior vice-president, Gerald Mason, says the UK and EU are still emerging from a “rigged” market: "British Sugar can produce as much as they want without any constraint or tax or tariffs.”
Philip de Pass, executive director of the ACP/LDC Sugar Industries group, which lobbies for exporters, says trade from smaller producers would be “decimated” if the UK market is further opened up.
British Sugar, for its part, insists it is not afraid of a fair fight.
“I already compete on a tariff-free basis with sugar from France, from Germany, from the Netherlands, which is incredibly efficient,” says Kenward. “I have no fear about that – I’m happy to compete. The only bits that do cause me concern are those bits of the market which are distorted.”
British Sugar - is a subsidiary of Primark owner Associated British Foods - is also facing challenges closer to home. After a disastrous 2020 in which weather, pests and disease crippled yields, the company is now caught in an acrimonious dispute with farmers over the amount it is willing to pay for beet. Farmers argue a price rise on offer is not enough to make up for that disaster.
“What happened in 2020 is very raw and sore with the growers,” says Michael Sly, chairman of the National Farmers Union (NFU) sugar board.
British Sugar insists an improved deal will be reached, but it’s a fall from grace for beet, which has a strong history of price and production regulation that used to make it among the closest thing farmers had to a safe bet.
A process of deregulation under the EU, and the UK’s post-Brexit trajectory, mean it is exposed like never before.
Now, farmers seem less certain, with many considering walking away from beet entirely. People are “very seriously questioning whether it’s got a place on the farm at all,” says Clarke.
Some people close to the industry say a road to redemption could lie in technology – pointing to the example of the Netherlands, where sugar beet is being used to synthesise new sustainable materials. However, British Sugar does not seem to be interested in such a shift.
“Where’s the research?” asks Rickard. “Where’s the interest in developing the industrial products from sugar which might open up whole new opportunities for the British sugar beet?”
British Sugar rejects suggestions it is behind the times. “I think we could make a really strong case that we’re the most innovative sugar company in the world,” says Kenward, who points to improvements in efficiency and the development of biofuels.
Clarke is sceptical. “What else are they going to say?” he says. “They’re not investing, they’re closing factories, they are turning growers away.”
