A new presentation from Seafish shows the impact assessment of fuel price shock and raw material price increase on the UK seafood sector
A presentation which is based on a modelling exercise conducted in early March of this year, shows the need for the UK government to act quickly in bringing in an initiative to help the industry through the current fuel crisis.
The presentation by Ariana Motova, Chief Economist/Interim Head of Economics with Seafish, is called the ‘Impact assessment of the fuel price shock and raw material increase on the seafood sector’.
The result from the assessment shows that the economic viability of the UK fishing fleets has already been affected by the pandemic in 2020, therefore fuel price increases would drive more fleets to operational losses. In the worst-case scenario, two-thirds of the fleet might not be able to cover operational costs by income. In an optimistic scenario, almost half the fleets operating profit might drop to negative values.
Estimated drop of UK fishing fleet GVA (due to increase of fuel price) is 16-24% compared to 2019-20 baseline years. Pelagic fishing fleet is the main contributor to overall UK fishing fleets GVA (by 43%) and operating profit (by 65%), therefore if that fleet is excluded from calculations overall operating profit of the rest of UK fishing fleets might be negative.
Overall GVA and operating profit estimated for all scenarios (pelagic excluded) might drop to lowest levels in 2008-2020. Employment is modelled depending on the effort, therefore the evolution of employment is as for effort.
Nephrops trawlers, beam trawlers and scallop dredgers are expected to be affected the most by modelled scenarios. Only 2 segments in this group of 12 segments are expected to retain positive operating profits. Passive gears using fleets expected to be the least affected by the fuel price change, as fuel costs in this group of segments normally lower as a share of total costs and income. However larger (>10m) Longliners are expected to experience operating losses.
In summary the assessment finds:
- The UK fishing fleets economic viability was significantly affected by the pandemic, therefore fishing fleets economic performance is more sensitive to fuel price increase when using 2019-20 baseline years for the parametrisation.
- If the fuel price remains at the highest level of £0.90 per litre (S1), 2/3 of fishing fleets might drop to negative operating profits and won’t be able to cover their operating costs.
- Even more fleet segments would not be able to cover capital and financial costs as net profit indicator was not presented in this analysis.
- Reduction of the fuel price to £0.68 per litre after shock in March-April (S2), would help 4 demersal fleet segments to keep fishing operations profitable.
- While increase of whitefish prices (S3) is expected to improve economic situation of 2 additional demersal fleet segments.
- Nephrops trawlers, beam trawlers and scallop dredgers are the most vulnerable fleet segments. In all modelled scenarios only two fleets, in this group of 12, operations remain profitable. Some of these fleets, e.g. scallop dredgers might be even more affected if price for luxury seafood goes down due to reduction in customers purchasing power.