A London School of Economics (LSE) report warns that non-tariff barriers to trade and restricted access to labour after Brexit will leave UK consumers facing shortages of butter, yoghurts and cheese.
The impact of Brexit on the UK dairy sector, sponsored by Arla Foods, says that any friction and any limitations on access to key skills will mean that consumers pay the price through less choice, higher prices, and potentially lower food standards.
The LSE study predicts three possible outcomes:
That it will 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.
Escalating pressure on costs, and ultimately increased consumer prices for dairy goods. Current dairy imports include cheese, butter, butteroil, whey, buttermilk and fermented products, yoghurt, concentrated milk, powders, milk and cream, infant formula and ice cream meaning that the impact could be widespread.
That ways are 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 our dairy industry – something neither farmers nor consumers would accept.
This is 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. Amongst the issues caused by non-tariff barriers and unavailability of key labour the report identifies:
There will also be increased times for customs inspections at UK ports, with even a seven-minute additional waiting period for each inspection adding 10 hours of delays and additional costs of at least £111 per container, and risks of additional delays thanks to asking the UK’s new Customs Declaration Service, designed to handle only 150 million declarations per year, to handle the more than 250 million expected post-Brexit.
Also, 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.
Arla Foods UK, the country’s leading dairy company and part of a pan-European cooperative owned by around 11,000 farmers, has previously noted that a hard Brexit without a trade deal could have a disastrous impact on this country’s dairy industry and its consumers.
Ash Amirahmadi, UK Managing Director, Arla Foods UK 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.”
Setting the context for the LSE report is the fact that the UK has the second largest dairy trade deficit in the world, at up to 16 per cent (98 per cent of our dairy imports are of EU origin). That heavy reliance on EU imports means that any problems at the border post-Brexit and shortages of labour in key areas are likely to have a major, and predominantly negative, impact on the domestic market in the form of shortages of products and significantly higher prices.
Mr Amirahmadi added: “To protect the British public we are calling on both sides in the negotiations to be pragmatic and sensible as they address the practicalities of Brexit, allowing us to have frictionless customs arrangements and ready access to key labour in the years ahead.”