Arla Foods UK, the country’s largest dairy company, has warned that if Brexit were to result in non-tariff barriers to trade and restricted access to labour, it would have a huge impact on the country’s dairy industry. The company, which has a turnover of £2.58 billion (€2.9 billion) and employs around 3,500 people in the UK, bases its claims on a report it commissioned from the London School of Economics (LSE), which identifies three possible outcomes:
1. Dairy Shortages
It could become much harder to import dairy products from Europe, which would result in dairy shortages, particularly of speciality cheeses.
2. Rising Prices
A growing pressure on costs will ultimately be passed on to the consumer and the price of imported dairy products such as cheese, butter, butteroil, whey, buttermilk and fermented products, yoghurt, concentrated milk, milk, cream, infant formula and ice cream will rise.
3. Falling Food Standards
To mitigate these first two outcomes, ways may be found to ramp-up UK production and cut farm costs, which the company states would ‘in the short-term at least inevitably undermine the world-leading standards of our dairy industry – something neither farmers nor consumers would accept.’
Additional Supply Chain Problems
The report also says that non-tariff barriers and a shortage of key labour ‘will have costly impacts throughout the supply chain, problems that could be exacerbated by a shortage of vets, lorry drivers and farm workers post-Brexit. Increased times for customs inspections at UK ports, with even a seven-minute additional waiting period for each inspection adding ten hours of delays and additional costs of at least £111 per container.’
Arla Foods UK, part of a global dairy company and co-operative owned by 11,200 dairy farmers, approximately 2,400 of whom are British, also highlights that the report found that the UK’s new Customs Declaration Service is designed to handle 150 million declarations per year, but could be expected to handle more than 250 million declarations post-Brexit.
Other supply chain concerns raised in the report included ‘additional costs due to subjecting products of animal origin (POAO) such as dairy to checks at the border – if, indeed, border posts are equipped to do such checks at all… [and] ‘A particularly acute challenge caused by 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.’
Ash Amirahmadi, managing director of Arla Foods UK, states: ‘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.
‘Our dependence on imported dairy products means that disruption to the supply chain will have a big impact. Most likely we would see shortages of products and a sharp rise in prices, turning everyday staples, like butter, yoghurts, cheese and infant formula, into occasional luxuries. Speciality cheeses, where there are currently limited options for production, may become very scarce.’
‘Brexit might bring opportunities to expand the UK industry in the long term, but in the short and medium term, we cannot just switch milk production on and off. Increasing the UK’s milk pool and building the infrastructure for us to be self-sufficient in dairy will take years. 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.’