By Mark Fairlie.
Cheese, butter and yoghurt could all become luxury items in Britain following its split from the European Union. Industry experts have warned that there may be a significant increase in the price of dairy products as further pressure is placed in the infrastructure to import both the raw and finished product into the country.
The research from the London School of Economics (LSE), as commissioned by international dairy company Arla, suggests that delays on the border could be responsible for the change.
Brexit and the UK Dairy Industry
The LSE report, The Impact of Brexit on the UK Dairy Sector, highlights that the UK currently has the second largest dairy deficit in the world; with 98% if all dairy imports coming from the EU.
Arla noted that the border breakdown between the UK and the EU will likely leave consumers in the UK with higher prices and less choice when it comes to buying dairy products.
Some of the most popular dairy imports in the UK include cheese, butter, whey, buttermilk, concentrated milk, ice-cream, and infant formula; meaning the impact of the price hike could be significantly widespread.
The report outlined three possible outcomes based on the issues faced by the dairy industry today. The government’s white paper on the future relationship between the United Kingdom and the European Union laid out plans to ease trade between Britain and the rest of the EU. However, the LSE has warned that friction in these processes could make it more difficult than ever to import dairy products from Europe.
While this can be said for any imports from mainland Europe, the timescale for importing perishable goods is much shorter than other items. The report identified a number of issues caused by non-tariff barriers and a shortage of key labour such as vets, drivers, and farm workers.
Delays at the border
Extra security required at the border for imported goods is expected to increase customs inspection times at UK ports. The report estimates an additional seven-minute waiting period for each inspection post-Brexit; equating to over ten hours of delays and additional costs of £111 or more for each container that needs to be checked.
Further delays are expected to arise from the UK’s new Customs Declaration Service. This government scheme will be launched in August 2018 to replace the current CHIEF customs declaration process.
This means that trader importers and exporters must now record their shipments on a Government Gateway account; with a completely free access to self-service tools, checklists, and guides.
While the latest service hopes to streamline the system for those transporting goods in and out of the UK, the CDS is only designed to handle 150 declarations a year. Arla Foods warn that additional delays could arise since more than 250 million traders are expected to require the service after Brexit.
There is also the issue of subjecting products of animal origin – such as meat and dairy products – to strict checks before they can enter the UK. This puts a great deal extra cost and time delays on importers, leaving many with no option but to raise their own prices for customers to make a profit.
Increased cost of production
UK managing director of Arla Foods, Ash Amirahmadi, said that the UK’s “dependence on imported dairy products means that disruption to the supply chain will have a big impact.”
Britain does not currently produce enough milk to keep up with the population’s demands. This has created a dependency on dairy-surplus countries in the EU like Ireland, France, Germany and Denmark for everyday dairy products.
The increase in time and cost for border processes means Britain will most likely “see shortages of products and a sharp rise in prices, turning everyday staples like butter, yoghurts, cheese and infant formula, into occasional luxuries.”
Amirahmadi also predicts that certain other products such as speciality cheeses from different areas in Europe could become “very scarce” in the UK after Brexit.
The added pressure to keep production levels high and farm costs low also threatens to “inevitably undermine the world-leading standards of our dairy industry,” Arla warns.
Rising food prices
While Brexit may create new opportunities to expand the dairy industry in the future, Amirahmadi says this could take many years to do.
Milk products with a fat content of between 3% and 6% are currently charged tax at 74%, while feta is rated at 28%, and grated cheese at 50%. If appropriate deals are not set in place before Brexit takes place, tariffs placed on imported goods could increase significantly.
“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,” added Amirahmadi. “Increasing the UK’s milk pool and building the infrastructure for us to be self-sufficient in dairy will take years.”