Jars of sauerkraut and packets of Polish sweets have become commonplace on the UK’s supermarket aisles. As people migrated to the UK from EU countries, and Poland in particular, supermarkets were quick to meet the market. Savvy entrepreneurs took the opportunity a step further, opening stores and wholesale empires based on the import of EU specialities.
But migration to the UK is falling. According to the Office for National Statistics, net migration to Britain fell by 49,000 to 273,000 last year. And with the country on the path to Brexit, the future for such businesses is uncertain. Can they cope with a potentially declining customer base and rising import prices?
For Anish and Minal Shah, the jury is out. The couple first started selling east European foods at their south-west London convenience store in 2004. Anish says: “Our initial inspiration was one customer, a local childminder from Slovakia. She made the case for us to try a small test order. We sold our first batch in three days and thought we really could be on to something.”
Following this success, in 2006 the Shahs launched e-commerce site Halusky selling EU speciality foods. Now their business is the UK’s biggest importer of Czech and Slovak confectionery, grocery and drinks.
Some people order products from Halusky after trying them on a European holiday. But its main customer base is EU immigrants. As well as retail and wholesale businesses in the UK, Halusky sells elsewhere in Europe through Amazon. The Shahs have already started thinking of ways to secure their business post-Brexit.
Minal expects the UK will still be a popular place for EU residents to move, in spite of increased barriers. She is more worried about trade. “A rise in excise duties, for example, will have a direct impact on our prices.” The company’s worst-case scenario is a poor trade deal between the UK and the EU. If this happens, the Shahs may set up a branch in Slovakia and supply their continental customers from there, via Amazon.
Finding ways to spread risk across a business is a wise move at this time, says Lesley Batchelor, director general of the Institute of Export and International Trade. “Any business needs to be thinking about maintaining its sales to the EU but also looking further afield and hopefully maintaining or even increasing their sales in the rest of the world.”
According to Harry Smit, a senior analyst at international financial services provider Rabobank, the price of food imported from the EU is likely to rise by up to 8% after Brexit. In the single market products can effectively just be put across the border. But Brexit will bring border checks and these alone increase costs due to the extra trouble and time they incur, Smith says. “Then there’s also the possibility that the UK would put import tariffs on those products,” he adds.
Margo Kuna imports and sells Polish food. She is already feeling the effects of rising costs and predicts that over the next two years around 10% of Polish food shops will have closed. She and her partner Krzysztof Wawrzkowicz, both Polish nationals, spotted their opportunity while they lived in Warsaw. They gave up high-powered careers in technology and telecoms to launch M&K Polish Goods.
The retail and wholesale food business started with a warehouse near Doncaster and now includes five shops across the north of England and Scotland. Kuna says she already knows of many EU nationals who have left, or are thinking of leaving, the UK. But there is an additional challenge: “We realised a change in people’s spending habits. We think they are saving money in case they decide to leave. I think it’s only time until we will be forced to close our business.”
Though the business has some English and Scottish customers, the majority are Polish, which makes Brexit a worrying prospect. Economic uncertainty has already led to a decision not to open any more stores, while the weak pound has increased import costs.
Kuna and her partner have built lives for themselves in the UK and plan to stay. But she knows others who came to earn money for family or to pay mortgages back home. She thinks they may decide the UK is no longer an attractive proposition. “Right now, with the pound so weak, it’s not worth them staying.”
Dinesh Patel, whose family-run company Patson Ltd started as a traditional convenience store in 1979, is more optimistic. After spotting the influx of migrant workers to the UK in 2004, the Bradford-based business started importing food from eastern Europe. It now has five stores and a cash-and-carry in Bradford. All of these stock mostly eastern European foods, alongside basic British products. “It’s competitive but we haven’t thrown in the towel”, says Patel. “I’m optimistic that there’s a future in these businesses because the people who are here now, like it or not, are here to stay.”
While the weakened pound has seen Patson’s profit margins eroded by up to 15%, Patel is confident that things will improve. “We’ve been through the recession, this is just another storm that we have got to ride out.”
Instead, what does concern Patel is the way the growing integration of nationalities is altering food tastes. “There will be less demand as the new generation adapt,” he says. “I have seen the younger generation when they come in. We have all the eastern European sweets and candy from their country, but we see them buying brands that are predominantly available in England. As that kid grows up he is going to acquire a taste for English produce. And that could be our downfall.”
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