Greencore CEO Patrick Coveney said he believes it’s “more likely than not” that there will be a Brexit trade deal agreed this week that will remove the threat of tariffs between the EU and the UK.

Speaking to the Irish Farmers Journal, Coveney said tariffs on food and other imports would result in a 5% rise in food prices in the UK due to cost inflation, which is obviously a scenario the entire UK food industry is keen to avoid.

However, Coveney said it now looked likely that some form of trade agreement would be agreed, probably by the end of this week, which he believes will remove the threat of tariffs on goods being traded between the UK and the EU from January 2021.

Coveney said Greencore sources up to £100m (€111m) of food ingredients and packaging materials from Ireland every year. Despite the threat of tariffs hanging over some of these imports like meat and dairy ingredients, the Greencore boss said he believes the company has done a lot of good preparatory work to mitigate any potential tariffs.

On the future of the UK economy, Coveney said he believes there will be a considerable “bounce-back” in the UK economy once medical interventions like the COVID-19 vaccine and rapid testing are rolled out in 2021.

“The UK is a big, dynamic and resilient economy and I’m confident we will see a considerable bounce-back. A lot of UK citizens are now sitting on very high levels of savings because they haven’t been able to spend their money on things like travel and eating out. I think this latent build-up of savings could drive consumer activity in the UK,” said Coveney.

The Greencore boss added that he expects to see a strengthening in the value of sterling relative to the euro once a trade deal is agreed between the EU and the UK.

Capital raise

Last week, Greencore successfully raised £90m (€100m) from capital markets after it issued an extra 80m new shares. This cash injection will be used to shore up the company’s balance sheet and give it the extra liquidity it needs to weather the impact COVID-19 has had on its business, particularly its food-to-go business.

For its 2020 financial year to the end of September, Greencore recorded a near 70% decline in operating profits to £32.5m (€36m), as profit margins in the business shrunk from over 7% last year to just 2.6% in 2020.

Overall, Greencore saw its sales drop almost 13% for its 2020 financial year to £1.26bn (€1.4bn), with sales in its food-to-go division down 23% in the year. During the months of April, May and June, Greencore said its food-to-go sales more than halved (-53%) as sandwich sales were hit particularly hard.

However, the company said it has seen positive momentum since the summer, with sales of food-to-go products down just 20% by September.

Even with the recent restrictions during November, Coveney said sales were more resilient than the first lockdown back in April, with food to go sales only back 26% this time around.