The impact of Brexit on the UK dairy sector

More than two years have passed since the UK’s decision to leave the European Union, with “Brexit Day” looming ever closer. Both the UK Government and the EU have said that frictionless trade is a key priority; and the UK Government has published a White Paper on the UK’s future relationship with Europe which aims to achieve that goal, but this still has to be negotiated with the EU (and continues, of course, to be a matter of debate in the UK).

Given that changes could come into force as soon as March 2019, businesses such as Arla Foods UK have been compelled to start contingency planning, analysing what effect these changes might have on its business, on its farmer owners and above all on British consumers. To give more depth to this analysis, Arla commissioned LSE Consulting to produce a report to analyse the impact of Brexit on the UK dairy sector.

The key finding of the report is that without frictionless trade and unfettered access to key skilled workers after Brexit, there will be significant impacts on consumers as supply chain costs go up. Delays at the border, exacerbated by a shortage of vets, lorry drivers and farm workers could mean:

Increased veterinary checks required as the number of vets decreases leading to a growth in workload of 372% for vets at the border. There could also be rising costs associated with EU national lorry drivers and farm workers, as they become harder to recruit. Government data has already reported a 10% increase in some wages.
Additional delays are likely due to pressures on the UK’s Customs Declaration Service, which is designed to handle 150 million declarations per year – a number that is expected to go up to more than 250 million post-Brexit.
Further additional costs due to subjecting products of animal origin (POAO), such as dairy, to checks at the border. POAO face greater scrutiny when imported to the EU, and for those outside it, veterinary control costs £50 per 6 tonne consignment, with organic certification costing £45 per consignment.
Increased times for customs inspections at UK ports – for every extra seven minutes of port check times, transportation times will increase by 10 hours, incurring additional costs of at least £111 per container.

The backdrop to all this is that, at 16% the UK has the second largest dairy trade deficit in the world meaning it heavily relies on imports – with the overwhelming majority (98%) of UK dairy imports coming from the EU.

Given this context, the result of potential issues and delays after Brexit identified in this report, could be a lack of availability of dairy staples on supermarket shelves, with products that have limited production capacity in the UK such as speciality cheese particularly prone to shortages. There could also be an increase in the costs for these products. The only alternative is not an alternative at all: watering down the UK’s world-leading food and animal welfare standards in a rush to ramp up production quickly, a choice that no farmer and no consumer would be prepared to make.

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