Why the big banks are saying goodbye to suburbia

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Two banks are closing branches in this Manchester suburb this year

Next week the boss of one of the UK’s largest banking groups will descend on Manchester, to celebrate the opening of the first of Lloyds’ new super-size branches.

At more than 15,000 sq ft (1,394 sq m) – and at a cost of £3m – it is the bank’s most expensive branch ever, and a likely blueprint for other British cities.

But while Antonio Horta-Osorio will be all smiles, some of his customers may have mixed feelings.

Banks may be investing heavily in mega branches in the centre of cities, but those in the suburbs are disappearing fast.

In Manchester at least 23 suburban bank branches have closed – or will close – in 2017 alone.

Here, as elsewhere, it is the least prosperous places that appear to suffer the worst.

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Droylsden has a number of empty shops

A short tram ride east from the centre of Manchester is the town of Droylsden.

Its economic imagery is stark.

Even at lunchtime, the 1960s shopping precinct has just a handful of customers, mostly visiting the chip shop.

Lloyds closed its branch here this summer, and NatWest is about to follow suit.

Looking at the empty shops and deserted pavements, it is evident that the banks weren’t the first to leave.

Nevertheless, local councillor Anne Holland closed her Lloyds account in protest.

“It’s making the area look poverty-stricken,” she says.

“I’m really upset about it. They’re no longer a service for people. They don’t care about people like us.”

Lloyds points out that in one of its smaller branches in Manchester last year there were just 20 regular customers a week. And that number was down by a third on the year before.

  • Lloyds to shrink hundreds of branches in size
  • Bank branches take on a new fragrance
  • Lloyds names locations for 100 branch closures

But not everyone is unhappy about suburban branch closures.

Along the Oxford Road, to the south of Manchester city centre, all three banks are due to close their doors before the end of the year: NatWest, Lloyds and TSB.

However a shortage of customers – known as “footfall” in the industry – is not the problem, as the streets are packed with students from two universities.

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This NatWest branch is closing, but few students are worried

Most in the internet generation are not particularly bothered about losing their local branch.

“I don’t go into banks that often,” says student James Charnley.

“I try to do most things online. However it’s nice when you’re desperate to have an actual branch.”

“With online banking it’s not that much of a problem,” says another.

Bye bye suburbia

The branches closing in Manchester this year:

  • NatWest: New Moston, Denton, Royton, Hale, Uppermill, Timperley, Marple, Eccles, Ramsbottom, Manchester Univeristy, Droylsden
  • Lloyds: Mosely Street, Manchester University, Tyldesley, Droylsden
  • TSB: Ashton Old Road, Cross Street, Stockport Street
  • HSBC: Manchester University
  • Santander: Atherton
  • RBS: Little Lever

While branches are closing in Manchester’s suburbs, the city centre is another story.

Walk amongst the crowds in Market Street, outside the Arndale shopping centre, and you can appreciate why the banks are apparently so besotted with the spending power of visitors to the centre of the city.

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The new Lloyds branch in Manchester city centre is its most expensive yet

It’s not just Lloyds.

NatWest, TSB and Nationwide are all in the process of opening new or refurbished branches. Their shiny new buildings jostle competitively within 200m of each other.

The trend towards city centre banking is now pretty well established.

“It’s been going on for some years,” says banking analyst Chris Skinner.

“In the States they’ve been doing it for a long time. They call it a ‘hub and spoke’ strategy, where you have a large hub in the centre of the main city, and then micro-branches and self-service operations for the satellites around the city centre.”

He blames the culture of free banking, introduced by the Midland Bank in the 1970s, which has left banks struggling to make good profits.

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Both NatWest and TSB are opening new branches

While Lloyds admits that the new city centre branch in Manchester is the model for the future, it denies that it is turning its back on the suburbs.

“We are considering opening a small number of these flagship branches in the largest city centres across the UK, under the Lloyds Bank, Halifax and Bank of Scotland brands,” says Jakob Pfaudler, Lloyds director of community banking.

“But our investment goes way beyond city centres. We are investing in a number of what we call anchor branches – existing branches in large towns and cities – and community branches in smaller towns and villages.”

Lloyds also has more than 27 mobile branches, particularly operating north of the border under the Bank of Scotland brand.

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The new Lloyds branch is the first to have a coffee bar

For those happy to use a city centre branch, the facilities can be much better thank a typical bank.

The new Lloyds branch in Manchester has free wi-fi and recharging facilities for laptops. And local businesses are encouraged to drop in and use the first floor for meetings – whether or not they are Lloyds customers.

If you want to withdraw a valuable item from a safety deposit box, such as a piece of jewellery, there is no need to speak to a member of staff.

Instead, with the help of fingerprint recognition, a robot will find your deposit box down in the vault, and deliver it to you in a private and secure viewing room.

The concept has been described as being more like an Apple store than a bank.

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Black horse with your coffee?

But perhaps what will attract the most attention is the coffee bar.

If you ask nicely they’ll even make a black horse out of chocolate to sit on top of your cappuccino.

Source : [1] http://www.bbc.co.uk/news/business-41440192

How would an interest rate rise of 0.25% affect me?

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The governor of the Bank of England, Mark Carney, has suggested that interest rates could rise “in the near term”.

Many experts think that could mean as early as November.

So how would a rate rise of 0.25%, to 0.5%, affect borrowers and savers?

We know there are more savers than borrowers, so more people are likely to be pleased at the prospect of rising rates, than those who will be disappointed.

Will my mortgage be affected?

According to the Bank of England, 43% of homeowners are on variable or tracker rates. In theory most of those will see their mortgage repayments rise when the Bank of England raises rates. By contrast 57% of borrowers are on fixed-rate deals, and will not be affected immediately.

Currently 90% of new home-owners are on fixed deals, and they tend to have the largest loans. But depending on when their two or five-year term finishes, borrowers will inevitably face higher repayments eventually.

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How would a rise affect repayments?

According to the Nationwide Building Society, a 0.25% rise in base rates would have a modest affect on anyone on a standard variable rate (svr). On the average mortgage of £125,000 an increase of 0.25% would increase monthly payments by £15 to £665. That would amount to an extra £185 per year.

The following table assumes there is 20 years left on a mortgage, and that the rate rises from the current average of 2.56% to 2.81%.

Affect of a 0.25% rise in base ratesMortgage balance
Monthly increase
Annual increase
£75,000
£9
£111
£100,000
£12
£148
£125,000
£15
£185
£150,000
£18
£221
£175,000
£22
£258
£200,000
£25
£295
£225,000
£28
£332
£250,000
£31
£369
source: Nationwide

Long-term impact

As Mark Carney is fond of reminding us, the rises in base rates will be small, and the pace will be gradual.

So while the impact of the first hike may be small, someone with a mortgage advance of £150,000 could eventually find themselves paying as much as £161 a month more, according to figures supplied by the Halifax, Britain’s largest lender.

How subsequent rises could affect mortgage paymentsAverage monthly repayment
% rise in mortgage rate
Increase in monthly payments
£679.74 (current average for new mortgages)

£698.90
0.25%
£19.15
£718.36
0.5%
£38.61
£738.13
0.75%
£58.38
£758.20
1%
£78.48
£778.56
1.25%
£98.82
£799.23
1.50%
£119.48
£820.18
1.75%
£140.44
£841.43
2%
£161.69

source: Halifax
Base: Repayment mortgage for £150,000 loan

Savers

The average easy-access savings account is currently paying 0.35% in annual interest. Some banks accounts are paying as little as 0.01%. So any rise in base rates could be a welcome boost for savers, even though any increase would be small.

One other problem in recent years has been that banks and building societies have been able to borrow money from the Bank of England very cheaply, so they haven’t needed to compete for deposits from savers.

The Funding for Lending Scheme (FLS) and the Term Funding Scheme (TFS) have therefore helped to depress returns for savers.

“The good news for savers is that both the FLS and TFS are ending at the beginning of 2018, so perhaps providers will start to need funds from savers once more,” said Anna Bowes, a director of Savings Champion.

“This, as well as a Bank of England base rate rise, will hopefully really make a difference.”

How a 0.25% rise in base rates might affect my savingsCategory
Current best buy rate
Best buy after 0.25% rise
Easy Access
1.26%
1.51%
Notice Account
1.6%
1.85%
Easy access ISA
1.1%
1.35%
Notice ISA
1.3%
1.55%
1 year fixed rate bond
1.95%
2.2%
3 year fixed rate bond
2.2%
2.45%
5 year fixed rate bond
2.45%
2.7%
source:Savings Champion (Sept 17)

Source : [1] http://www.bbc.co.uk/news/business-33568469

Could wood pulp make cars lighter and more efficient?

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Image caption

This replica Citroen 2CV was crafted out of fruitwood. Could future cars contain wooden parts?

Car parts of the future could be made out of a surprising material. Wood.

Researchers in Japan are working to create a strong material out of wood pulp that could replace steel parts in vehicles within a decade.

Work is also charging ahead in the country to develop plastics that can withstand high temperatures, to replace metal for parts near the engine.

These innovations are part of a wider industry push to make cars lighter.

“There is a rush to try and cut as much weight as possible, especially on cars which will pollute more, like SUVs [sports utility vehicles] or pick-up trucks,” says Paolo Martino, principal automotive components analyst at IHS Markit.

Slimmer cars consume less fuel. The US Department of Energy says a 10% reduction in vehicle weight can improve fuel economy by up to 8%.

Manufacturers also want to make electric models as light as possible so they can travel further on a single charge, and help resolve the battery “range anxiety” faced by car owners, Mr Martino says.

And that’s where the humble tree could come in. After all, wood has been used to build ships, homes and furniture for millennia.

Researchers at Kyoto University in Japan say a material made from wood pulp could be as strong as steel, but 80% lighter.

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Image caption

Wood was often used for some car parts, but never near the engine

The team chemically treats wood pulp, which consists of millions of cellulose nanofibres (CNFs), and disperses these CNFs into plastic.

Blending CNFs with plastics creates a strong, hybrid material that could replace steel in auto parts, they say.

Prof Hiroyuki Yano, who leads the work at Kyoto University, says the material could be used to make door panels, fenders and car bonnets. The researchers are working with the Japanese government, carmakers and other manufacturers to develop the material.

Cellulose nanofibres are already used in a range of products, from ink to transparent displays.

While the material faces plenty of competition from more commercially established lightweight options, like carbon fibre, Prof Yano believes CNF-based parts could be viable alternatives.

But Vivek Vaidya, senior vice president at consultancy Frost & Sullivan, has some doubts.

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Image caption

Wood has been used as a building material for millennia

He thinks it’s feasible that “non-performance” parts – anything but the engine, transmission and wheels – could be mass-produced from wood pulp-based materials, but that parts manufacturers might struggle to keep pace with auto production lines.

“Most components are supplied on-demand, [so] whether a wood or organic material can be made available in a just-in-time way is definitely a question mark,” he says.

Separately in Japan, researchers are working on specialised plastics for car parts.

Prof Tatsuo Kaneko, from the Japan Advanced Institute of Science and Technology, is developing plastics made with biological molecules.

The new material is also lighter than steel and can tolerate temperatures of up to 300C, the researchers say.

“Plastics haven’t been used in car parts requiring higher heat resistance around [the] engine block because they haven’t been able to withstand the heat,” Prof Kaneko says.

“But the bioplastics I have produced can withstand higher temperatures.”

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Image caption

Researchers in Japan say bioplastics could replace metal for parts near the engine

He’s working with a number of Japanese carmakers, auto part and electronics makers – as well as foreign companies – on the research.

And one of the biggest advantages of using the material, which he says could be a viable alternative to steel in around five years, would be a drop in vehicle weight.

While lighter plastic car parts might help cut vehicle emissions and increase the range of electric cars, doesn’t their manufacture bring other environmental risks?

Prof Kaneko acknowledges that substituting materials like glass for bioplastics could increase pollution, as the waste is non-biodegradable.

More Technology of Business

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But he argues that his materials are kinder overall to the environment than traditional plastics.

The manufacture of conventional petroleum-based plastics results in large amounts of carbon dioxide, whereas bioplastics, made from micro-organisms, produce lower volumes of waste, he maintains.

The drive to use “greener” materials is gathering speed among automakers more broadly.

Frost & Sullivan’s Mr Vaidya says manufacturers are trying to shrink the total carbon footprint of a vehicle and “not just the emissions that come out of the tailpipe”.

The push serves tightening regulations and consumer demand. Both the UK and France plan to ban new diesel and petrol vehicles by 2040, to reduce pollution and carbon emissions.

China, the world’s biggest car market, wants electric battery cars and plug-in hybrids to account for at least one-fifth of its vehicle sales by 2025.

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Getty Images

Image caption

Lightweight carbon fibre is prized in high-performance sports cars

“There’s definite movement towards improving the green credentials of the car by using materials that are more environmentally friendly,” Mr Vaidya says.

To shed weight BMW has focused on carbon fibre, and last month unveiled a new slimmed down M5 sedan with a carbon fibre reinforced plastic roof.

Toyota uses the same material for parts in its Prius Prime and Lexus LC 500 models, cutting weight and boosting battery range in the Prius.

For Jaguar, aluminium is a big focus. The company says the metal weighs about one third of the equivalent amount of steel.

“Every 100kg saved with an aluminium chassis helps to reduce the vehicle’s CO2 emissions by 9g per km, and fuel usage during its life by up to 800 litres,” Jaguar says.

And niche component makers like Corning, which markets its toughened Gorilla Glass for use in windshields and other glass-components, says its high-tech glass is a third lighter than conventional car windows.

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Source : [1] http://www.bbc.co.uk/news/business-41145744

The firms that donate as many goods as they sell

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MADI

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Hayley Besheer (bottom right) donates lingerie in countries such as Ecuador

More businesses are embracing the “buy one, donate one” model. But can they turn a profit while doing good?

New, clean underwear is one of the most under-donated items to charity, and domestic violence refuges and homeless shelters for women often face shortages.

So American Hayley Besheer came up with an unusual way to tackle the problem.

The 20-something founded lingerie company Make a Difference Intimates (Madi), which donates a pair of its trendy knickers, or other items of underwear, for every one that it sells.

Ms Besheer is following in the footsteps of other entrepreneurs motivated to do good, including US shoemaker Toms, which pioneered the “buy one, donate one” model in the early part of this decade.

And like Toms, her business fully intends to grow its profits while achieving its social mission.

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Image caption

Madi’s lingerie is made of sustainable bamboo cloth

“Consumers are attracted to the buy one, donate one model because it helps them give back,” she tells the BBC.

“The market is leaning more and more towards brands that offer quality products with a social purpose.”

Before starting Madi, Ms Besheer had no experience of designing fashion or running a business, and faced many challenges as she learned to do both.

For instance, a friend who was originally meant to help run Madi, backed out after deciding it was too risky. Ms Besheer understood her dilemma.

“She didn’t want to put any money into the business,” Ms Besheer says. “But you have to be fully committed, and you need to take out a lot of loans in the beginning.”

Madi’s underwear costs more than $30 (£23) per pair – considerably more than what lingerie retailer Victoria’s Secret charges for many of its premium-brand knickers.

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Consumers want brands to have a social purpose, Ms Besheer says

Ms Besheer says her panties are fairly priced, because they are made from bamboo cloth – a material that is “more comfortable than cotton, more sustainable, and longer-lasting”.

People are also happy to pay more to support a good cause, says one customer, Lauren Cimpl.

“While one pair of Madi underwear may cost more than a similar panty in a department store, I feel you’re buying two pairs of underwear for the $30-or-so price tag,” Ms Cimpl says.

“Shopping is usually a self-focused activity, and there’s nothing wrong with that, but being able to give back while you’re shopping makes it even better.”

Brands with a social justice agenda can enjoy a powerful “halo effect”, say some experts.

According to a study published in the Journal of Consumer Research, consumers thought red wine tasted better, and other products – such as running shoes and hair loss treatments – performed better if they knew about a company’s charitable donations.

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Image caption

Toms’ founder and boss, Blake Mycoskie, lists his official title as “chief shoe giver”

However, there are critics of the buy one, donate one model.

In the developing world, Toms was accused of fostering dependency and unfairly competing against local businesses by giving away its products.

Mindful of the criticism, the Californian company revamped its philanthropy, and now produces many of the shoes it donates in partnership with local manufacturers.

It also supports access to eye care, safe water initiatives, and anti-bullying programmes.

More stories from the BBC’s Business Brain series looking at interesting business topics from around the world:

How do you like your wine – with a cork or screw-cap?

Are changeable heels the end to women’s sore feet?

Do the colours you wear at work matter?

Turning the dead into vinyl records

“Our original goal was to produce one-third of the shoes we donated in these regions, and we have since exceeded that with local factories in Ethiopia, India, Kenya and Vietnam,” says Amy Smith, the company’s “chief giving officer”.

Although Toms’ founder and boss, Blake Mycoskie, lists his official title as “chief shoe giver”, he keeps a close eye on the company’s sales and profits.

In 2014, Mr Mycoskie sold half of his business to private equity giant Bain Capital in a deal that reportedly valued the firm at $625m.

Image copyright
Gary S. Chapman

Image caption

Toms donates one pair of shoes for every one it sells

But Toms, which is profitable, says it isn’t looking to make an easy buck at the expense of its mission.

“Toms has proven that conscious capitalism is a viable business model,” Ms Smith says. “But without our mission, the ‘why’ of Toms would be lost.”

Warby Parker, which sells fashionable glasses online, has also proved that the buy one, donate one model can work.

The privately held company has attracted deep-pocketed investors, such as General Catalyst, and has a valuation of more than $1bn. It may also be headed for an initial public offering, various media reports have suggested.

Warby Parker takes a different approach to its philanthropy than Toms. For every pair of glasses it sells, it makes a donation to a non-profit which will produce a pair in the country where it operates.

The non-profit also trains local people in how to conduct eye exams and fit glasses. According to Warby Parker, its system makes more sense than just donating goods.

Image copyright
Warby-Parker

Image caption

Two of the Warby Parker founders, David Gilboa (left) and Neil Blumenthal

“Donating is often a temporary solution, not a lasting one,” the firm says on its website. “It is rarely sustainable.”

Back at Madi, Ms Besheer says its sales have grown by 25% every quarter since it was founded three years ago.

The company started to make a profit from the end of 2016, and has no debt thanks to successful crowd-funding campaigns and partnerships with local retailers.

It also has donated more than 4,500 pairs of underwear in eight countries including Haiti, Panama, Cuba and Ecuador.

Ms Besheer now wants to set up a production line in Kansas City, where her company is based, so she can continue to produce Madi garments in the US. Currently the firm relies on subcontractors in the city.

She says it is important to manufacture in America, so she can ensure workers are paid fairly, and to reduce the firm’s carbon footprint.

As for the buy one, donate one model, she feels it strikes the right balance.

“I feel that if we don’t address the underwear issue at refuges, no one else will. And if we can grow a successful business at the same time, that’s even better.”

Source : [1] http://www.bbc.co.uk/news/business-41097280

Why UK exporters are set for a sugar rush

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Media captionSugar gets sweeter for UK farmers

The UK’s sugar beet industry is looking to ramp up production, as European Union quotas come to an end this week after nearly 50 years.

For the first time since 1968 the UK can produce and sell as much sugar around the world as it would like.

The end of the quota also means that French, German and other EU producers can sell more sugar into the UK.

Experts predict that could result in lower prices – but the British industry is confident it can compete.

What will the sugar changes mean?

Two years ago Paul Kenward, the boss of British Sugar, had a problem.

Under the EU’s quota he was only allowed to sell 1.056 million tonnes of sugar beet, but it had been a particularly bumper harvest and he’d produced more than 1.4 million tonnes.

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British Sugar

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British Sugar has four factories in the UK, including this one at Newark, Nottinghamshire

“Customers wanted to buy from me, but I wasn’t allowed by European Union rules to sell it,” Mr Kenward tells the BBC. “We had to store it for two years – that was very expensive.”

From this weekend, those limits will come to an end after years of lobbying by the UK government.

The 3,500 British farmers that grow beet – which looks like a big turnip – and British Sugar, which is the main processor of British-grown beet, see the change as a huge opportunity.

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Image caption

UK beets account for approximately 60% of British sugar consumption

British Sugar – which also makes Silver Spoon sugar – plans to step up production immediately and is looking to sell 1.4 million tonnes next year, up from 900,000 this year.

It’s also planning to export sugar to the world market for the first time in at least a decade.

“The UK is one of the most efficient producers worldwide,” says Jane Clark, who farms sugar beet in Lincolnshire. “It should put us in a good place to be competitive.”

The changes are not linked to Brexit – and the industry is hopeful it will still be able to compete after the UK leaves the EU.

Britain’s other big sugar producer, Tate & Lyle Sugars, processes sugar cane, and so is not directly affected by the changes.

How big is the UK sugar beet industry?

  • There are nearly 10,000 workers in the industry’s UK supply chain
  • The UK consumes 2 million tonnes of sugar a year
  • 60% of that comes from UK beets
  • Another 15% comes from EU beets and 25% from imported sugar cane

Source: British Sugar

How will it affect sugar prices?

Analysts say the increased supply of sugar – not just from the UK, but from other major EU producers – should ultimately lead to lower prices.

At the moment, white sugar sells for about 500 euros (£440) a tonne in the EU, compared with just over 300 euros a tonne on the international market, according to EU figures.

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Science Photo Library

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Analysts say the price of sugar could fall – but it’ll have little impact on sponge cakes

Prices will become more volatile after the end of the quota, says Carlos Mera, a sugar analyst at Rabobank. “Whether consumers benefit or not, I think they probably will.”

However, the effect on sugary products, like cola and sponge cake, will be more muted, because the cost of sugar only makes up a small part of the overall price of those goods.

For example, if the cost of sugar fell by 40%, that might lead to a saving of less than 1% on the price of a Victoria sponge cake.

So far, though, sugar supply contracts in the EU are still much higher than international prices, says Callum Macpherson, head of commodities at financial services firm Investec. There is also the effect of the sugar tax on soft drinks to take into account.

The Food and Drink Federation says it is difficult to predict how prices will be affected.

A wide range of factors, including world market prices, beet sugar exports, cane sugar imports, the price of other ingredients and raw materials, influence the price of sugary goods, it says.

Will the industry be able to cope?

Although the end of the quota enables UK firms to sell more sugar abroad, it will also allow EU producers to sell more in the UK.

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AFP

Image caption

French beet producers will also be able to produce more and could target the UK

When EU milk quotas were scrapped in 2015, it flooded the market with oversupply and put some dairy farmers out of business.

So will beet farmers suffer a similar fate?

“I don’t think there are any sugar beet producers in the country that just grow sugar beet,” says Jane Clark. “We all grow a range of crops, whether it be wheat, barley, or oats.”

Mr Kenward says the industry learnt a lot from what happened with milk. “We prepared for this for the last few decades, and can change production more easily than dairy farmers,” he says.

There’s also the uncertainty around what trade terms will be in place after Brexit.

British Sugar says that if the EU starts charging tariffs on its sugar beet after Brexit, the firm would ask the UK government to charge the same tariff on EU beet.

As for trade with the rest of the world, British Sugar accepts that dropping sugar tariffs might be part of the deals struck with other countries.

But it’s still confident it can compete, as the UK is “the most cost-efficient producer in the world”, Mr Kenward says.

Is there a difference between sugar beet and sugar cane?

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Image caption

Brazil, Thailand and India are the world’s biggest sugar cane producers

When it comes to flavour, beet farmer Jane Clark says there is no difference between sugar from beets or cane.

The climate and soil conditions in the UK, France, Germany, and the Netherlands suit sugar beet. Its production took off after an English blockade during the Napoleonic wars hit French cane-sugar imports.

In comparison, sugar cane tends to grow in the tropics, with Brazil, Thailand and India the main producers.

“You can refine sugar down to various levels,” Jane says. “White sugar is the most refined, your brown sugar is less refined.”

Ultimately, it’s all the same chemical formulation: “Sugar is sugar”

Source : [1] http://www.bbc.co.uk/news/business-41412717