Some forecasters are predicting that the size of the reduction could be closer to the 60,000 tonne cut back demanded by Iceland's Marine Institute than the 30,000 tonne reduction suggested by financial and economic analysts just a couple of weeks ago.

The Institute’s report revealed the size of the cod stock in Icelandic waters has reached a historical low and the Institute does not expect the cod stock to grow quickly.

The Icelandic Central Bank said it expected a 17 per cent fall while Glitnir Bank thought a 20 percent reduction was likely. Either way, the cuts will be big and will impact on both prices in Britain and the Icelandic economy.

The Icelandic government signalled on Friday it would cut cod fishing quotas by 30 percent to restore dangerously low fish stocks. The current cod annual cod quota, which expires at the end of August, stands at 193,000 tonnes. Cuts in the haddock quota cannot be ruled out either although they will be much smaller.

Fisheries Minister Einar Gudfinnsson said: "This decision will be made with the long-term effect in mind. We are aware that the cod stock is very vulnerable and that we have to act now and cut the quota so that we can continue to fish cod in the future."

Kaupthing economist Thorhallur Asbjornsson said the quota news would slow, but not derail, the economy. "It might be around one percent of GDP (gross domestic product) it will shave off. Of course it is significant, but we don't believe it will be enough to cool down the economy."

Finance Minister Arni Matthiesen said the impact on the economy would be extensive but manageable. "Nothing will replace 60,000 tonnes of cod in the economy," he said. "But the bottom line is that we are reacting to an existing problem with temporary cuts in the cod quota so that we can continue to fish cod in the years to come."

The cuts are expected to reduce Iceland's exports by at least £120million a year. And the news is certain to anger fishermen and fishing communities in Iceland who are certain to suffer as a result.

Gudmundur Th. Jónsson, a skipper at Iceland's largest fishing company Samherji, has cast doubt on the accuracy of the Marine Research Institute report and said the Institute has been wrong in its predictions for the past three to four years.

The impact on fishing ports on the Humber and in Scotland has yet to be assessed, but cod prices will rise significantly. Even without the new quotas, cod prices on the Humber have been at an all time high.

In Grimsby last week, large cod was selling at £64 a stone while haddock went up to £40 a stone. The unseasonably cold and wet weather has had an impact on fish sales trends, with consumers opting to go for 'cold weather' meals. Conversely sales of salad seafoods like prawns and smoked salmon have slumped.

Major food service fish suppliers like Young's and M&J Seafoods have both reported high prices for large cod in the past week.

Young's said in its July market report: "With this as a backdrop there is only one way pricing will be going, and that’s upwards. For the Cod lovers of Britain (and there’s millions of us) these higher values will make farming a viable option for Foodservice in the coming years. As we start the summer season, the barometer of price, frozen at sea fillets, are coming into the country at record prices "

On top of all this, the floods in Lincolnshire and East Yorkshire have destroyed large areas of potato crop which will make life even more difficult for fish and chip shop owners.

www.fishupdate.com is published by Special Publications. Special Publications also publish FISHupdate magazine, Fish Farmer, the Fish Industry Yearbook, the Scottish Seafood Processors Federation Diary, the Fish Farmer Handbook and a range of wallplanners.

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