Any friction and limitations on access to key skills would mean that UK consumers pay the price through less choice, higher prices and potentially lower food standards, dairy cooperative Arla Foods claimed.
Its view was based on the findings of a report, The impact of Brexit on the UK dairy sector, published today (17 July) by the London School of Economics (LSE).
The report identified a number of issues caused by non-tariff barriers and unavailability of key labour (see box). These included increased times for customs inspections at UK ports, subjecting products of animal origin such as dairy to checks at the border, and increased veterinary checks.
It followed the Government’s White Paper on the UK’s future relationship with the EU, published last week (12 July). The White Paper proposed maintaining frictionless trade through a new UK-EU free trade area for goods underpinned by a common rulebook.
A ‘dairy dilemma’ in the UK
Arla said the issues identified in the LSE report meant the UK faced a “dairy dilemma” in the UK, with three possible outcomes.
Firstly, that it would become much more difficult to import dairy products from Europe, leading to a shortage both of dairy staples and particularly of products such as speciality cheeses, where domestic supply is constrained by limited production capacity in an already tightly managed supply chain.
Second, that there would be escalating pressure on costs and, ultimately, increased consumer prices for dairy goods. Arla noted that the UK had the second-largest dairy trade deficit in the world, at up to 16%. Meanwhile, 98% of UK dairy imports were of EU origin.
Finally, that ways would need to be found somehow to ramp-up production and cut farm costs, which in the short-term at least would inevitably undermine the “world-leading” standards of the UK dairy industry – something neither farmers nor consumers would accept, Arla claimed.
These scenarios were in addition to “costly impacts” throughout the supply chain, problems that could be exacerbated by a shortage of vets, lorry drivers and farm workers post-Brexit.
Part of a pan-European cooperative, owned by around 11,000 farmers, Arla Foods UK has previously claimed that a hard Brexit without a trade deal could have a disastrous impact on the country’s dairy industry and its consumers.
It acknowledged that the probability of the UK and the EU reaching a deal in their negotiations seemed to change every day, but said the report made it clear that even with an agreement over trade and a ‘softer’ departure from the EU, these major issues remained, posing a dilemma for the UK dairy industry at large.
Arla Foods UK managing director Ash Amirahmadi said: “The farmers that own the Arla dairy cooperative already balance keeping consumer prices down with maintaining quality and the best standards, including high animal welfare.
“There’s no margin to play with here in the value chain. Any disruption means that if we don’t get the practicalities of Brexit right, we will face a choice between shortages, extra costs that will inevitably have to be passed on to the consumer, or undermining the world-class standards we have worked so hard to achieve.”
LSE report: key concerns
- Increased times for customs inspections at UK ports. A seven-minute additional waiting period for each inspection would mean 10 hours of delays and additional costs of at least £111 per container.
- Risks of additional delays thanks to asking the UK’s new Customs Declaration Service, designed to handle only 150 million declarations per year, having to handle the more than 250 million expected post-Brexit.
- Further additional costs due to subjecting products of animal origin such as dairy to checks at the border – if, indeed, border posts are equipped to do such checks at all.
- Increased veterinary checks at the same time as the number of vets decreases as a result of Brexit, leading to a growth in workload of 372% for vets at the border
- Rising costs as EU national lorry drivers and farm workers return home due to the fall in the value of the pound and other Brexit-related issues.