Analysis: Tim Edwards reflects on the state of trade in Europe following ENA members meeting in Essen

Trade disparities open across European nursery stock as financial problems bite.

Each meeting of the European Nursery Stock Association (ENA) includes an agenda item on the state of trade at home.

There have been many occasions when members have all related similar battles with the weather. Many times too they have talked of the same impact from changes in the European economy.

What I have not experienced before is the disparity of views I heard at ENA's meeting in Essen at the end of January. We are all suffering from the troubles in Europe, but those troubles are affecting individual states in dramatically different ways that will ultimately leave each nation in a different place when we finally leave them behind.

Swiss strength

The problems originate in the eurozone, so you might expect those countries outside the euro to be finding life easier. But even strong currencies are not without their problems.

Switzerland has one of the most stable currencies of any nation in the world and while the euro and dollar have weakened, the Swiss Franc has strengthened. But that was a problem for a Swiss producer selling within Switzerland in competition with eurozone producers.

The currency difficulty was compounded for the many Swiss nurseries traditionally exporting stock. The strong Swiss Franc was starting to hurt - companies' turnovers were falling and there was talk of job losses.

Bulgaria made an interesting case. It still has its own currency, but it is pegged to the euro in readiness for joining. It has also received significant help from Europe to improve its infrastructure. That was the sort of help that had construction in Ireland roaring away a few years ago and had Irish nurseries doing very well.

But Bulgarian nurseries were not geared up for large-scale supply of amenity stock, while lots of hungry competitors in nearby states were. As a result, lucrative Bulgarian plant orders were now being supplied from outside the country.

To make matters worse, the retail market in Bulgaria, which had grown in recent times, took a step backwards. Ambitious local nurseries that had steadily increased the size of stock they offered to local garden centres have been left with expensive large plants unsold as the pinch saw centres looking for cheaper, smaller-sized stock.

In Russia, the problems faced by growers were different again. The country's currency is not pegged to the euro and the economy is growing at a rate of four per cent, bringing a healthy increase in demand for trees and shrubs.

But while wealth has flowed in, expectations have risen and Russian nurserymen have yet to develop the skill base needed to produce the quality of plants its customers now demand. Growers were disturbed by the value of trade they saw lost to other European growers desperate to move their stock into a healthy market.

Those hungry European exporters - predominantly Holland, Germany and Italy - fall into two camps.

Export prospects

In Germany and Holland, gross domestic product (GDP) was growing and the home markets were not doing badly, so the amount of stock looking for an export market was not dramatically higher than usual.

But in Italy, growth was negative, the country was in crisis and government, business and household spending were all under pressure. The home market for plants had collapsed with a great deal of stock looking for a market.

As a result, in Italy debtor days lengthened and cash was in short supply, with credit difficult to find and expensive. Worried raw materials suppliers were taking a hard line against nurseries that were slow to pay. Jobs were being shed and some nurseries were expected to fall by the wayside.

The Spanish delegate said life in Spain, which has less export history, life was much worse. The home market collapsed, meaning that product had nowhere to go.

Exports of six per cent were not enough to provide much help, he said. Debtors do not pay, raw material suppliers are reluctant to supply because of fears they will not get paid, credit non-existent credit and closures are inevitable. Could it get any worse?

Well yes it could. In Portugal, where GDP was falling more steeply, the home market had all but vanished. There was no history of export, even the government took 200 days to settle its bills and debtor days were closer to a full year.

Worse still, VAT on plants had increased from six to 23 per cent, payable within 45 days. Many nurseries had already fallen, with those left having already shed perhaps 50 per cent of their workforce.

None can afford the raw materials that are needed to produce plants next year and the Portuguese delegate believed that the country would simply not produce plants in the future.

UK market

How did the UK sit in all this? Stirling is not joined to the euro but markets were bound by the exchange rate. While importers might be disappointed by the lack of movement, for the nurseryman it was not a bad thing. If the euro rate moves much over EUR1.25 against the pound, the market would become that more appealing to overseas competition.

Assuming that there is no global melt down, UK horticulture could eventually come out of the tunnel and find life genuinely improved.

Just as within individual countries, weaker competitors might go to the wall in hard times and leave stronger companies in a better position, it is conceivable that production of nursery stock could draw to a close in certain states. European production levels would therefore be significantly reduced and life could be better for those that remain.

Tim Edwards is chairman of Boningale Nurseries and a member of the ENA

Association aims - Items on the agenda

The European Nursery Stock Association (ENA) has members from 15 countries.

It works on political matters at EU level but also deals with technical matters of interest to non-EU members.

Issues covered by the ENA's agenda in recent years include:

- EU quality standards for nursery stock products.

- Plant names list.

- SAN-code (speaking article number).

- Packaging directive.

- Plant diseases.

- Environmental aspects.

- VAT.

- European Single Payment Scheme.

- Loss of plant protection products.

- Modernising the EU common plant health regime.

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