Because of long-term agreements, the UK gets about 75% of its total energy supplies from Norway and the United States. The UK is exposed to international energy prices but its supply is mostly assured by two large producers who are both happy with the arrangement. The high price of energy (although right now energy prices are rather low) has a long-term impact on the UK, nothing compared to the economic re-arrangement caused by Brexit. Certain sectors were gravely affected by our departure from Europe, the worst is the car industry, currently operating at about 40% of its peak in 2016. Of course, this doesn't tell the whole story, as there were tons of ancillary businesses attached to that sector.
For the UK, the shift has been violent, and the Conservative government has done everything it could to make the shift more painful, my suspicion is that this was done on purpose by some idiots who really had drunk the cool-aid, but I could be wrong, it could just be the civil services incomparable incompetence at work again. The UK's reality is that any trade agreement with Europe will suffer when Europe is in trouble, they will cut imports to sustain domestic businesses. We are now importers into Europe.
We have to assume that trade agreements will be well negotiated, but the new government of Mr. Starmer will swallow its pride and get the best deal it can from a new US administration in 2025. This is the single most important trade deal for the country. Europe will look after Europe and we are no longer part of the club.
At this point a recession in Europe is a given, just reading the fall in German industrial electricity consumption tells you bad things are going to happen, and the United Kingdom will suffer through association. Bruxel will easily justify cutting out the UK to save the Union.
The UK's most important exports are Gold, Cars, Turbines, Energy, and medication. Four out of five will NEVER face export hurdles, only the vehicle segment faces risks of further cutbacks, about half of all car exports are to Europe, and the balance to North America (Porche/Land Rover).
In terms of agriculture, the Welsh experiment is interesting (if very brutal) to see how quickly the Welsh farms will consolidated by industrial farmers. I suspect that it will not be enough, as the UK will have to open its agriculture to the US. Some of their practices will be difficult to accept, but consumers will quickly adapt, the cost differential is too large to ignore (US milk is 30% cheaper than British milk). This will certainly affect farms across the country, including ours, this is why we are increasing our produce processing, to capture more of the profits in the sector.
I mentioned earlier this week that we are seeing weakness in demand from our wholesalers, we looked at our sales statistics on all the products sold through our subsidiaries, and even there we have noticed a decline in demand, not that it affects our sales, but it takes more time to run out of inventory. In the past, we would sell out within 36 to 48 hours of new supply being available online (we send notifications to our clients of new supply), now it's more like 48 hours to 60 hours. Obviously, this will colour our growth projections for the next few months, all but one of our businesses have spare capacity, but it has been decided to keep current overall production unchanged for the rest of 2024.
We are a private company, which operates in a very specific segment of the food industry, we hope that our sales are safe from a recession, but we have no way of knowing, this will be the first recession we face since the farm was established in 2019.
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