The UK’s food and drink manufacturers are optimistic they can reap “substantial benefits” from the free trade agreements (FTAs) with Australia and New Zealand that enter into force on May 31, despite a sharp decrease in exports to the two countries.

The value of UK food and drink sales to Australia and New Zealand fell by 13% and 11.5% respectively in the first quarter of this year, according to the latest trade snapshot from the Food and Drink Federation (FDF).

A closer look at the top UK exports to the two markets reveals that soaring food price inflation in recent months likely masks the real extent of the decline. For example, the value of UK egg exports to New Zealand in Q1 increased by 39.4% year over year, but in volume terms declined by an enormous 99.6%.

Nonetheless, the FDF, which counts over 1,000 member companies and trade associations, is bullish on the potential for the FTAs to spur growth for the food and drink export sector, calling the reduction in trade so far this year a “temporary setback”.

“While we have seen a drop in exports to Australia and New Zealand in Q1 2023, we firmly believe the removal of tariffs through the new free trade agreements will unlock exciting opportunities for UK food and drink manufacturers,” says the FDF’s head of international trade, Dominic Goudie.

Signed amid much fanfare in December 2021 and February 2022, the UK’s free trade agreements with Australia and New Zealand mark its first from-scratch pacts since leaving the European Union. The deals provide tariff-free access to both markets for all British goods and flexible rules of origin, as well as what the UK government calls “robust protections” for British farmers, including staging tariff liberalisation for sensitive goods over time.

However, the agreements have not been without their critics. In a written statement to the International Trade Committee last year, the National Farmers’ Union, which represents more than 46,000 farming and growing businesses in England and Wales, said of the UK-Australia deal: “British farmers are being asked to go toe-to-toe with some of the most cost-effective food producers in the world. But there is scant evidence that the government has the vision to create the conditions to allow our farmers to compete.”

On the New Zealand agreement, Angus Brendan MacNeil, International Trade Committee chair prior to its dissolution in April, said in January: “Throwing open UK agri-food markets to cheaper goods has caused understandable disquiet among producers… We are running the risk of locking our beef, sheep-meat and dairy producers into a contest they never sought without support or protection, with competitors able to place them at a serious disadvantage, and at a time of immense challenge for consumers and businesses.”

In the face of these concerns, the FDF is striking a positive tone, pointing to the benefits delivered to the food and drink sector by other free trade deals, such as the UK-Japan trade agreement, which came into force in January 2021. “Our sector’s exports [to Japan] are up 58% in Q1 2023 compared to the same period in 2021 as our exporters help meet rising Japanese demand for quality British food and drink,” the federation says.

With around half of the world’s 2.3 billion middle-class consumers expected to be in the Indo-Pacific region by 2030, the UK government has also been keen to stress that the two FTAs serve as a “gateway” to its imminent joining of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and provide a stepping stone to more opportunities for British exports to those markets.

In a further boost to confidence for the UK’s £24bn food and drink export industry, the government this month unveiled a raft of measures to boost export opportunities and “get more British food on plates across the world”.

Among the initiatives are £2mn to boost the UK’s programme of global trade shows and missions, as well as £1.6mn for the food and drink portion of the country’s international brand marketing campaign, and five additional agri-food and drink attaches who will spearhead the removal of restrictive market barriers.

“Government is taking important steps to help businesses utilise new export opportunities with the welcome announcement of additional specialist trade attachés,” says the FDF’s Goudie. “But more could be done to maximise opportunities for growth for domestic manufacturers, by dropping costly plans for UK-wide ‘not for EU’ product labelling and providing a dedicated trade portal to improve access to vital information.”

For Nicola Thomas, director of the UK Food and Drink Exporters Association, the key for exporters to take advantage of the new FTAs will be greater capacity-building.

“Whilst markets such as New Zealand and Australia have a strong affinity with UK products, these are highly competitive countries with a strong home-grown supplier base,” she says. “We welcome lower tariffs, but UK companies still need to research and evaluate each country in relation to their own product category and brand aspirations. As with all markets, companies must create a robust market entry and development plan to succeed.”