2205 final report.pdf - Agra CEAS Consulting

IMPACT OF THE EU SUGAR REGIME ON BCCCA MEMBER COMPANIES
5. Impact of the reform options on the UK BCCC sector
5.1. Impact of the reform options on the EU sugar sector and its implications for
the UK BCCC sector
As presented in Section 3, the current CMO for sugar has not created the competitive conditions
necessary for a level playing field vis-à-vis other Member States; in the UK the industrial price for
sugar is higher and more volatile although sugar is typically in surplus. In an environment of
production quotas, this relatively high sugar price has tended to accelerate and amplify the process of
structural change within the industry, through a series of merger and acquisition activities and
divestment of production facilities out of the UK. Any reform to the current CMO should therefore
address these issues and encourage and enable change for the long-term sustainability of the sector.
According to our industry survey, if reform of the present regime results in no change in the current
differential between the UK price of sugar and the world price over the next five years, then in
general UK BCCC production and employment is likely to decline further (Figure 5.1). This trend
would result from further concentration within the industry and divestment from the UK. Of those
companies interviewed, over three-quarters believe that employment would continue to decline
(with over a third believing that this decline would be major or considerable), with the remainder
believing that there would be no change. Looking at the individual product sectors, the survey
results revealed slightly different trends:
• in the biscuit sector, half of the respondents suggested that there would be some production
decrease, with the other half believing that there would be no change;
• in the cake sector, the majority considered that there would be no change in production,
although a quarter suggested that there would be a considerable decrease;
• in the chocolate sector, all respondents were concerned that production would fall, with over a
third believing that this decrease would be major or considerable; and,
• in the sugar confectionery sector, over three quarters of respondents claimed that production
would decrease.
As one would expect a priori, these results indicate that those product sectors where sugar accounts
for a greater percentage of raw material costs, namely chocolate and sugar confectionery, are more
concerned about the cost of sugar and its impact on UK production and employment.
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